Being an investment analyst and portfolio manager, I am constantly on the lookout for companies that offer good investment opportunities. In this article, I take a look at Intel (INTC), International Business Machines (IBM) and Oracle (ORCL); three technology companies that may offer investors upside potential that outweighs the risks.
We'll use the management effectiveness ratios, book value-share, price-sales, price-book value, etc., to evaluate Intel, IBM, and Oracle.
Additionally, macro-economic indicators are provided at the end of the article. As part of investment analysis, analysts should consider both the company fundamentals and the macro-economic landscape. The macro-economic picture in the U.S. is deteriorating. In Europe, the economy is contracting.
Investment Thesis
Intel, International Business Machines and Oracle have declined in value based on price-sales, price-book value and price-earnings ratios. Given the current valuations and effectiveness of management ratios, investors should accumulate shares of all three companies.
However, the global economy faces headwinds from potential fiscal consolidation in the U.S., a shock to the global financial system stemming from the European Union debt crisis and slowing growth in China. Valuations could continue to decline if risks materialize and these issues could decline 25 - 50 percent from their 2012 peak values.
Investors should consider buying put options or selling call options to protect their positions.
Rating System
Buy - Be long
Neutral - No Position
Sell - Be short
(The ratings, research and analysis in this article should be considered as starting point for further research.)
Intel - Buy
Intel's management is performing better than its competitors in the industry. Additionally, book value-share is increasing, the share price is declining, and the valuation ratios are declining. This could be a good level to accumulate shares.
Company v. Industry (TTM)
- Return on Assets: 18.23 v. 1.90
- Return on Investment: 21.99 v. 1.68
- Return on Equity: 26.61 v. -0.67
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Book value-share is increasing; the increase is considered bullish.
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The price of common equity shares is increasing; although, recently the share price has declined.
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Recently, price-sales (the valuation metric) declined; the enterprise is getting cheaper.
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Recently, price-book value (the valuation metric) declined; the enterprise is getting cheaper.
IBM - Buy
IBM's management is performing better than its competitors in the industry. Additionally, earnings-share is increasing, the share price is declining, and the valuation ratios are declining. This could be a good level to accumulate shares.
Company v. Industry (TTM)
- Return on Assets : 14.07 v. 18.38
- Return on Investment : 21.48 v. 23.06
- Return on Equity : 74.04 v. 25.09
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Earnings-share is increasing; the increase in EPS is considered bullish.
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The share price is increasing; however, recently the share price has declined.
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Price-sales is increasing; although, recently price-sales has declined.
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Price-earnings is increasing, although, recently price-earnings has declined.
Oracle - Buy
Oracle's management is performing better than its competitors in the industry. Additionally, book value-share is increasing, the share price is declining, and the valuation ratios are declining. This could be a good level to accumulate shares.
Company v. Industry (TTM)
- Return on Assets: 13.71 v. 13.26
- Return on Investment: 16.47 v. 19.07
- Return on Equity: 24.50 v. 22.90
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Book value-share is increasing; the increase in the valuation metric is considered bullish.
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Shares of Oracle are trading near a previous support zone and could bounce from the level.
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On a price-sales basis, Oracle could be considered undervalued relative to previous recent price-sales valuations.
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On a price-book value basis, Oracle is undervalued relative to its recent history.
Macro Environment
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ISM non-manufacturing is declining; the pace of growth in U.S. non-manufacturing is slowing.
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The pace of job growth in the U.S. is slowing. Our expectation is for job grow to continue to slow.
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CB consumer confidence is increasing; consumer confidence is expected to decline in the coming months.
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European Union manufacturing PMI is declining; the index of manufacturing in the expected to increase in the coming months.
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European Union services PMI is declining; the index is expected to increase in the coming months.
Disclaimer: This article is not meant to establish or continue an investment advisory relationship. Before investing, readers should consult their financial advisor. Christopher Grosvenor does not know your financial situation and ability to bear risk and thus his opinions may not be suitable for all investors.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
