Last week, on the day that the S&P 500 hit a new high, International Business Machines (NYSE:IBM), hit a new low for the year. I realize that such new technologies as Facebook Inc. (NASDAQ:FB) and Twitter (NYSE:TWTR) are all the rage this year but, really, folks, IBM has reinvented itself for over a century, from tabulating equipment, to M-1s and BARs in WWII, to computers, artificial intelligence, super-computers, the PC, and, today, serious computing, big data, nano-computing, and all kinds of consulting.
That doesn't mean 140-character soundbytes won't someday become the conversational norm, or posting photos of ourselves getting out of bed and going back will go out of style, but, seriously, it's been done -- by Samuel Pepys in the mid-1600s. This suggests to me that people will now bid up anything except the tried and true.
That makes me want to take a fresh look at Oracle Corporation (NASDAQ:ORCL), also looking down in the mouth at the moment, at Apple Inc. (NASDAQ:AAPL), at Cisco (NASDAQ:CSCO) and at Microsoft Corporation (NASDAQ:MSFT), all "old" tech companies -- but not companies with old tech. With their cash flow, revenue and earnings, they can easily buy bright stars in the tech firmament and continue their growth. They may not grow at exorbitant rates but then we are paying just 12 times trailing earnings on average -- and I believe that will translate to single-digit PEs for the coming year.
In short, this changes everything. Clearly, investors would rather chase will-o-the-wisps than buy proven quality, giving us the opportunity to buy serious quality on the cheap. We are now buying IBM and ORCL and are close to buying CSCO and MSFT.
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Past performance is no guarantee of future results, rather an obvious statement but clearly too often unheeded judging by the number of investors who buy the current #1 mutual fund only to watch it plummet next month.
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Disclosure: I am long IBM, ORCL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. Current limit buy orders pending for MSFT