In uncertain times, it goes without saying that investors should stick with 'the known, and the true,' which is why I'm reiterating my Buy rating for Big Blue -- International Business Machines Corp. (NYSE: IBM), first recommended on February 18, 2009 at a price of $91.51. If you bought IBM in February, you're up about 35%. Just about everything is running in IBM's favor right now: look for a mid-single-digit revenue gain for IBM in FY2009 on stronger services division and software division revenue.
Further, prudent cost cutting is likely to widen margins in developed markets, while ample room for market share gains in emerging markets will enhance profitability abroad. The one operational negative: the systems and technology division, which will recover more-slowly. The First Call FY2009/FY2010 EPS estimates for IBM are $9.76 to $10.68.
And talk about value: with a P/E of about 12, IBM is cheap, hence the risk/return remains tipped decidedly toward a Buy.
Technically, IBM's stock chart looks beautiful -- a strong uptrend, with minor, constructive pull-backs, and a price that continually stays above the 50-day moving average -- a sign that institutional investors are adding to their IBM positions.
Stock Analysis: IBM is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in IBM now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your IBM position before December 2009. Sell/Stop Loss if you were to buy shares in this company: $62.
- -
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
Google's plan for netbook PCs moves higher into the clouds
Closing Bell: Stock bulls and dollar death (DDRX,GMCR, PEET, SBUX, EBAY, CI, TECD)
So long peak oil, here comes peak uranium
Add your comments