Wednesday, November 7, 2018

Big Blue! Why I purchased IBM!

IBM is in the news at this moment!

This merger would be the biggest in company history!! I like the move of buying a company to help revenue and profit and the software company Red Hat will do this. The price wasn’t terrible if you look at how Red Hat had been priced over time. Here is a good take from Chuck Carnevale of Fastgraphs Video... Also hurting the shares is speculation that the deal might not happen. 

Either way I think it’s an opportunity to get a great yield and take advantage of this spike lower. I am in at $115.50 and I consider it a steal. A recent Barron’s article said IBM insiders bought stock near a 9 year low. You don’t usually get a chance to by a huge company like this at a good price but I consider now that time. When I first started this blog and youtube channel I considered Microsoft a great buy at its low price and yield not knowing they would be in the cloud and the stock would be up 4X since then and all the dividends along the way. I’m not sure if IBM is going to do the same but I think buying at depressed levels the gains can be spectacular if IBM gets back to a normal evaluation and good growth rate.

Now I want to take a look at the current dividend yield at the time of this writing IBM is trading at $124.84 with a forward looking yield of 5.03%. Sometimes I have to check and really see if a company like IBM who has grown its dividend over the last 5-year dividend growth rate 12.9%. During the past 10 years the growth rate was 14.5%. The past 3 years was 11.6%

Now I know IBM has had its problems and the stock has gotten crushed. Warren Buffett sold it for another tech giant Apple Inc. At the time it was a good sell. I have traded in and out through the years with average results. I kind of gave up on the company for other stocks with a better outlook. I do think the turn around has been slow but with this acquisition it could speed up. It did get back on my radar when it hit the 4% yield mark and now its over 5% I was happy to pull the trigger. 

Let me know your thoughts on IBM! Are you a buyer? What is your 1 and 5 year outlook? 

Disclaimer: This is a personal weblog. The opinions expressed here are my own. All data and information provided on this site is for informational purposes only. Please do your own research before investing.

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