Last week, on the day that the S&P 500 hit a new high, International Business Machines (IBM), hit a new low for the year. I realize that such new technologies as Facebook Inc. (FB) and Twitter (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 (ORCL), also looking down in the mouth at the moment, at Apple Inc. (AAPL), at Cisco (CSCO) and at Microsoft Corporation (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.
THE FINE PRINT: As Registered Investment Advisors, we see it as our responsibility to advise the following: we do not know your personal financial situation, so the information contained in this communiqué represents the opinions of the staff of Stanford Wealth Management, and should not be construed as personalized investment advice.
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.
We encourage you to do your own research on individual issues we recommend for your analysis to see if they might be of value in your own investing. We take our responsibility to proffer intelligent commentary seriously, but it should not be assumed that investing in any securities we are investing in will always be profitable. We do our best to get it right, and we "eat our own cooking," but we could be wrong, hence our full disclosure as to whether we own or are buying the investments we write about.