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The computer integrated systems industry group is composed of the giant International Business Machines (NYSE:IBM) with many very good peer companies. I have selected five of the largest peer companies for this article. Apple, Inc. (NASDAQ:AAPL) is one of my top-five bellwether companies for comparative analytics. I often draw a matrix using my bellwethers, so I can gain a perspective of how other companies rank and compare. The relative matrix data always provide convincing and profitable analytics results.

Valuation analytics is fun because, at the end of the day, there is always a company that is clearly the best and one that is clearly the worst. Seeking profits using the best or be it seeking profits using the worst, we can be prepared for well ahead of future bull and bear market cycles. In this article, my focus is on IBM and AAPL. The remaining three companies are also well worth the time to study. They are: Micros Systems, Inc. (NASDAQ:MCRS), NCR Corp. (NYSE:NCR) and Diebold, Inc. (NYSE:DBD).

Professors Logic

My perspective for being consistently profitable in the stock market is to go with the flow. Never set high or low parameters or use fancy theories, just listen. Listen each and every day to what the marketplace is telling you. Most people do not know how to listen, and that is an expensive deficiency. My valuation work and technical indicators always tell an honest and clear story. And that story tells me the current and future direction of the marketplace. When the message is bullish, I use my 'best' companies. When the message is bearish, I use cash or my 'worst' companies. Any company that is in between (the best and the worst) is never considered for investing wisely. Therefore, profiting in the stock market is, not to permit your investments to diminish (by more than a reasonable limit) in a bearish cycle, and vice-versa. You might want to visit my Instablog article on "My Rotation Model."

In my work, I always split my lists into primary and second-tier companies. The reason is that most often the second-tier companies produce better valuations and have higher profit potential. When the risk / reward ratio is the same, I naturally recommend the best to my clients. Please understand that there are a number of other, fine 'second-tier' companies in this industry group.

I have found that most analysts continue to be positive about the computer industry's forward growth. However, viewing the below charts the price per share, over the past two months, is down considerably for all companies. There have been several warnings that have been in a progression for quite some time. For me, these pullbacks could be anticipated knowing the U.S. general markets were caving in and that valuations, two months ago, were not very positive. I have included a computer industry group chart below. Remember, these charts don't lie about whether you are profitable or not profitable.

You may have noted my sharing, in my recent articles, that there are signals suggesting that overall industry earnings growth is slowing. My longer-term projections confirm this negative trend may continue on for a year or more.

I have found, over the years, that conservative valuation analytics is worth the time spent. They nearly always foretell the near- to short-term direction of a company's share price.

Valuation for International Business Machines

Current Price:

$199.00

Comments: These are not strong Valuations and Target Price Projections. The Valuation Divergence is negative. Although IBM edges AAPL in my current comparative analytics, it is not as strong as the financial analysts would have you believe. Projected earnings growth for IBM indicates that it will be declining through 2014. My technicals are currently graded as, "good" but the top has already been registered in March. Consensus opinions is much too bullish.

This suggests that IBM will continue to follow the general market indices. (Click on chart to view a 20-year chart for IBM).

Security's valuations should be updated and studied as frequently as possible. This work may or may not offer positive support or perhaps a negative warning! I do not recommend buying or holding IBM due my forecast of a bearish technical cycle.

Target Price:

Plus 10+% / minus 22+% from the current price.

Trailing P/E:

14.9

Forward P/E (fye 12/ date):

12.0

PEG Ratio:

1.39 - - ok

Price to Sales:

2.15

Price to Book:

11.1 - - very high

Dividend

1.71%

Return on Investment (R.O.I.)

21.5%

Valuation Divergence:

(minus) - 24+% from current the price.

Valuation for Apple, Inc.

Current Price:

$574.00

Comments: These are also not strong Valuations and Target Price Projections. The Valuation Divergence is negative. When I do further fundamental studies, the result neither improves nor declines. Projected earnings growth for AAPL indicates that it too will be declining through 2014. My technicals are currently graded as, "good" as are my consensus opinions.

At this time I would not buy or hold either IBM or AAPL. (Click on chart to view a 20-year chart for AAPL).

Target Price:

Plus 8+% / minus 18+% from the current price.

Trailing P/E:

14.0

Forward P/E (fye 12/ date):

10.6

PEG Ratio:

0.68 - - very good

Price to Sales:

3.77

Price to Book:

5.24 - - very high

Dividend

none

Return on Investment (R.O.I.)

40.8%

Valuation Divergence:

(minus) - 20+% from current the price.

Source of raw data: Finviz.

Projected Price is calculated and produces a probable range of the current price over the coming one to three months. Fundamental Valuation and Technical Opinion is calculated and translated into a Rating. See the below Report Card. I often suggest cash and patience as an alternative.

Professors Report Card

Company Symbol

Fundamental - weighting (40%)

Technical - weighting (35%)

Consensus Opinion - weighting (25%)

Report Card -Grade: ( 0 - 100 / A - F ) - (ascending / status quo / descending)

IBM

Very Good

Good

Very Good - Excellent

85 / B -- descending

AAPL

Very Good

Good

Good

83 / B -- descending

MCRS

Very Good

Poor

Very Good

78 / C+ -- descending

NCR

Poor

Poor

Poor

68 / D -- descending

DBD

Good

Good

Good

78 / C -- descending

My weighted Fundamental, Technical and Consensus Opinion ratings range from Excellent to Very Poor. Grades below 90 / A are not current (never are) candidates for buying. Grades above 60 / F are not current (never are) candidates for short selling. Information and data are ever changing, so be alert. Every company's "Grade" can be from a neutral grade (60 to 90 / D to B) to a buy (greater than 90) or short sale (less than 60) in a very short time.

My methodology for grading all securities is by comparative analytics using my weighted fundamental, technical and consensus opinion date. If you were to go to MSN Scouter, you would find a very similar methodology for its rating of any given company. It uses several more criteria but each receives a letter grade of A - F. For example: Apple, Inc. AAPL has for several years received a very high grade fundamentally as well as for the consensus opinion. When the technical weighting falls so does the technical "grade" it will receive. An example of a negative company would be Research in Motion Limited. (RIMM). Here the company has very poor grades in all three of my criterion. The difference between MSN Scouter and my work / analytics is the methodology used to arrive at the appropriate "grade" for a given company. Note: Apple and Research in Motion are used for examples because of the large divergence in both valuations and performance.

Further support for the above notes can be read in my Instablog article on "My Rotation Model."

(click to enlarge)

Industry Status

The computer integrated systems industry is and has been very strong since early 2009. This fact is applicable, both fundamentally and on the charts. All these companies are technically in sync with its fundamentals and in stride with the industry. The question for most investors and that is yet unanswered is, do you buy, sell or hold?

(click to enlarge)

My criterion for taking a bullish position is that the company must have the prospect within its fundamental valuation and technical chart to outperform the general market, its sector, and industry group.

Market Status

I use several indices in my focus to identify the on-going bullish and bearish inflection points. The New York Composite Index is represented well by the ETF, SPDR S&P 500 (NYSEARCA:SPY). The Nasdaq Composite Index is represented well by the ETF, PowerShares QQQ Trust (NASDAQ:QQQ). In my work the identification of bullish and bearish inflection points is of critical importance. Because this is so critical, I also emphasize and use market "breadth" indices. Breadth does not have a tracking ETF; therefore, it was necessary to create my own excel charts.

These two indices, backed up with breadth, is the foundation for my technical analysis. An axiom for the general market says: "the direction (trend) of the general market has a 60% influence on security's profits or losses." The following two charts (long and short-term) include SPY, QQQ and two of the companies presented in this article. I hope you can understand why this analytic exercise is so important to my way of managing assets.

(click to enlarge)

(click to enlarge)

My general market opinion is that the fundamentals are over valued; the technicals are over bought, and the consensus opinion is way too bullish. I am currently a bear because my valuations are convincingly negative, and we are in a bearish cycle; it's just that simple!

Further support for my guidance for the general market can be read in my weekly Instablog article "Wednesday - General Market Update & Commentary."

Professors Summary

Currently, the above tables and charts present a clear and not-so-positive account of these five companies and the overall market indicators. It is a fact that, the stock market cycles endlessly both fundamentally and technically from bullish to bearish and then back to bullish again. Unfortunately, this is a pattern that is not well-understood or taken advantage of by most investors.

Within this present bearish time frame, there is nothing (longer-term) wrong with these companies. It is simple what happens when they turn bearish, and is just the on-going "cycling effect" of the way the stock market works. I hope you understand and will continue to follow my work / analytics. It won't be long before I can offer you a bullish and upbeat forecast once again.

May I remind you to take a few minutes to study my 5, 10 and 20-year charts? When buying or selling, taking a longer-term view of a security's price history is often the difference between profits and losses!

Conclusion

I am bearish on both the world economies and the general market. My more recent Instablog postings are focused on securities that should not be currently held in your portfolio. I suggest that it is vitally important for you to understand that holding cash during questionable time frames in the marketplace is a much wiser choice than holding your present positions. I can assure you that; this is definitely a "questionable" time frame!

Further and on-going support for some of these companies' current status will be posted this coming Saturday. My "Saturday Update" can be read weekly in my Instablog article.

Source: Report Card: Computer Industry Group With Guidance For Current And Future Profits