Is IBM a good investment as a growth stock right now?
If an investor is looking at different technology stocks to invest in for future growth, stocks like IBM, Hewlett-Packard (HPQ) and Dell (DELL) may come to mind. I personally like IBM if I was to pick one of these stocks and there is a good reason for this. I like IBM's strategy going into the future and it is also a tech company not in the cross hairs of Apple. (AAPL)
IBM's Strategy
One of the best drivers for higher margins in IBM's arsenal of service is its analytics strategy. The company helps its clients extract insight from all the data the business accumulates through its various sources. This information and analytics capabilities span software, hardware and services. IBM can take the data with services from dedicated analytic consultants to put together servicing plans for its customers.
Used in combination with this service are its new mainframe cycles. Its new zEnterprise EC12 mainframe server is designed to help clients securely and quickly sift through massive amounts of data, meeting the demands of retail and other clients in the age of "Big Data." Running at 5.5 GHz, IBM said the microprocessor that powers the mainframe is the fastest chip in the world. Processing speed is 25 percent faster than the previous model. IBM's software and services tend to be more profitable (margin-wise) than the mainframes, but these fuel the interest in its services. IBM says the new model could be used by retailers to manage online transactions and analyze clients' buying habits and then use the information to create a "more customized shopping experience. This is how the mainframe and the service division work together.
It is a perfect plan.
Not only does it have a nice plan that will pick up its sales and revenue stream, but it is a large tech company not having to deal with competition from Apple. There are no cross streams that the company has to worry about Apple taking business away. Combine these two concepts together and I believe IBM makes a perfect candidate for a long term growth company for the tech industry.
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Technically Speaking
Besides a dip I observe in the stock I would say it is in a mild bullish pattern presently. Both the RSI and the MACD can support this as the RSI is slowly following the stock and inching its way up also. Since it is presently at the bottom of the Bollinger Bands, I would expect it to move up the bands. Another case could be made for IBM to be moving between a trading channel from (182-202). In order for this to be played out, I would want to see the stock bounce back down at some point and the next low would also need to be lower.
The Options Play
The stock is presently trading at 195.15 and I expect it to move up to at least 202 before it moves back down. I am slightly bullish on the stock so will move in that direction.
- Buy a January 2013 call with a strike of '195' (priced at $9.45)
- Sell a January 2013 call with a strike of '200' (priced at $6.95)
- Net Debit to Start: $2.50
- Maximum Profit: $2.50
- Maximum Risk: net debit
- Maximum Length of Trade: 5 months
Reasoning behind the Trade
The stock looks poised to move up with better margins combining analytics with big mainframes.
Bouncing off the lower Bollinger bands.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
