Consider IBM for Shelter from the Recession Storm

Are you having nightmares about the daily drumbeat of economic doom and gloom? Is the fear of a recession giving you pause about buying stocks? Worried about our domestic malaise spreading worldwide? Perhaps you're simply seeking some ballast for your portfolio.

Consider IBM (IBM) as a potential safe haven in a recession driven equity storm. The last recession was in 2001. Since the start and end dates for a recession aren't identified until well after the actual event, let's just call 2001 a recession year. IBM closed the year 2000 at $85 ($79.72 adjusted for dividends/splits). IBM finished 2001 at $120.96 ($114 adjusted). For 2001, IBM returned roughly 42%. That same year, the S&P 500 had a total return of -11.89%. The MSCI EAFE (EFA) had a total return of -21.44%, and the MSCI ACWI returned -16.21%.

If IBM can repeat its feat of 2001, it would finish 2008 at approximately $153 (from a starting value of $108.10). In addition, IBM's current valuation, whether measured by sales, cash flow, or earnings, is below its early year 2001 levels. Sleep well.

Disclosure: Author has a long position in IBM