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  • Why Warren Buffett Isn't Selling IBM Despite Dismal Performance?  [View article]

    First of all CAT is selling at close to 20X forward earnings for the same reason that many energy companies have also seen their P/E's rise significantly over the last 12 months - collapsing EPS. CAT's consensus estimates show EPS falling over 20% causing the P/E on trailing earnings of 14X to rise to 20X on forward EPS. On the other hand IBM's EPS is going to be relatively flat over the next year. Amazon is able to be valued on revenue growth. When Amazon finally begins to report consistent profits that market will be able to assign an earnings multiple that is meaningful. Tesla is simple a cult stock and not fundamental valuation metrics are being applied. With IBM the sentiment is very poor because investors have lost patience and generally do not have a good understanding of where Rometty is taking the company, in spite of her articulating it very clearly many times.
    Nov 9, 2015. 10:40 PM | 7 Likes Like |Link to Comment
  • Why Warren Buffett Isn't Selling IBM Despite Dismal Performance?  [View article]
    You nailed it!
    Nov 9, 2015. 08:06 PM | Likes Like |Link to Comment
  • Why Warren Buffett Isn't Selling IBM Despite Dismal Performance?  [View article]
    I think that the market is telling you in regard to IBM that it does not have the patience for IBM as an investment when fast money can be made in FB, AMZN and GOOG. Buffett is one of the riches people on earth because he is able to see durable value in a company when the market has lost patience. If you actually listen to Rometty talk about the future of cloud computing, IOT and cognitive computing you would probably understand what Buffett is seeing in IBM. With all of IBM's long-standing deep relationships across all industries worldwide, no company other than possibly Microsoft is positioned better to lead in this new world of cognitive computing. I personally would argue that IBM has the edge over even Microsoft because Microsoft has traditionally resided on the edge of the enterprise, whereas IBM is the enterprise for many companies.
    Nov 9, 2015. 08:06 PM | 14 Likes Like |Link to Comment
  • The IBM Valuation Disagreement  [View article]

    In order to attempt to think like Warren Buffett one must force themselves to look out 5-10 years and understand what is inevitable and how a company and management team is "positioning" itself in order to capitalize on an inevitable and durable trend.

    If you want to invest some time in hearing how IBM is doing this directly from Ginny Rometty, see the following video: http://bit.ly/20H4lrj
    Nov 9, 2015. 10:43 AM | Likes Like |Link to Comment
  • The IBM Valuation Disagreement  [View article]
    IBMire, IBM is positioning itself for the IOT world with Watson. They have the technology, they have the relationships through services, and they are aggressively building the Watson brand.

    Nov 8, 2015. 08:22 PM | Likes Like |Link to Comment
  • The IBM Valuation Disagreement  [View article]
    That Forbes article is missing the big picture. Buffett's Berkshire Hathaway now owns Burlington Northern Railroad. Burlington and most of Berkshire's other businesses, like most businesses today have become heavy users of technology. Railroads use IOT technology extensively and this use most likely has made Buffett more comfortable with the pervasiveness of IOT technology and the inevitability of the need to store, analyze, process and sell the resulting data. This is exactly where IBM's is better positioned than any other company.
    Nov 8, 2015. 03:20 PM | 1 Like Like |Link to Comment
  • The IBM Valuation Disagreement  [View article]
    In a diversified portfolio some investments will benefit from the market comes to its senses shortly after an investment, some the wait will be 1-3 years and others will be longer. This is why I tell people that being a successful investor is hard.
    Nov 6, 2015. 09:09 PM | 1 Like Like |Link to Comment
  • The IBM Valuation Disagreement  [View article]
    desicon, IMO no other company has the technology, know how and positioning to be at the center of IOT's than IBM. I certainly hope that your forecast is right and it might even be conservative.
    Nov 6, 2015. 06:38 PM | Likes Like |Link to Comment
  • The IBM Valuation Disagreement  [View article]
    Mark, I count on the stock market being excessively irrational for long periods of time. If it were not, it would be impossible for investors to produce any level of alpha. Virtually every investor, at almost any time during their life, has a meaningful part of their investment portfolio that can be invested with at least a 10 year time horizon. However, the investor has to be more rational than the market with his or her convictions. The market will always test the rationality of investors and 9 times out of ten the market will win by making the investor second guess what he or she once thought was fundamentally true.
    Nov 6, 2015. 05:35 PM | 2 Likes Like |Link to Comment
  • The IBM Valuation Disagreement  [View article]
    Mark, looking at IBM over the last 10-15 years you do not see the correlation of stock price to earnings because like MSFT, GE, ORCL, etc. these one time growth stocks saw their multiples contract. At 10X, which is around where IBM is trading, this is likely a level that better reflects its growth constrained size. I imagine that should IBM be able to successfully divest their no-growth legacy businesses and continue to demonstrate that their new business initiatives can post 10%+ growth that ultimately the market will reward the stock with a multiple closer to 15X. I am not counting on 15X anytime soon, but 11X to 12X over the next several years seems reasonable.
    Nov 6, 2015. 05:24 PM | Likes Like |Link to Comment
  • The IBM Valuation Disagreement  [View article]

    Like the author, Warren Buffett and virtually any other successful investor (not trader), I believe that stock ownership is in fact a fractional ownership of an underlying company and thus the value of that ownership will ultimately reflect a reasonably fair and accurate present value of future cash flows that will either be used to invest in positive ROI endeavors, payout dividends or buy back stock.
    Nov 6, 2015. 05:18 PM | 2 Likes Like |Link to Comment
  • The IBM Valuation Disagreement  [View article]
    G2, Google has the algorithmic know how to process vast amounts of data for their own use and that is one reason why they have been so successful. However, IBM has the capability to process, analyze and package all of this data for others to use and that capability distinguishes them from Google and Microsoft.
    Nov 6, 2015. 05:14 PM | 3 Likes Like |Link to Comment
  • The IBM Valuation Disagreement  [View article]

    I will take the bait. Cloud computing first of all is a rapidly expanding market, much like network computing was a rapidly expanding market in the mid-nineties through the mid-2000's. Today, all technology is networked, which led us to cloud computing. Cloud computing is now a business model that has evolved from network computing. The next ubiquitous technology shift that will evolve from cloud computing will be "internet of things". What company is better positioned to be at the center of managing all of the data which flows from the push to "internet of things" than IBM?
    Nov 6, 2015. 02:47 PM | 7 Likes Like |Link to Comment
  • The IBM Valuation Disagreement  [View article]
    Very interesting analysis which largely validates a low to mid-teen IRR that I forecast over the next three years. IBM appears to be a very good risk/return proposition at current levels.
    Nov 6, 2015. 02:29 PM | 1 Like Like |Link to Comment
  • Retirees: I Did Not Buy IBM To Sell; It's About The Dividend Income, Stupid  [View article]
    elvis, your comment that the author did not mention "why the market has been in violent disagreement for the past two years" jumped out to me. A value seeking investor cannot worry about what "the market" agrees with or disagrees with. Values would not exist is the market does not routinely over-shoot or under-shoot the long-term value of businesses. The fact is that the market is a big auction where the vast majority of daily participants are not bidding on shares of companies based upon any well thought out estimate of long-term value. Instead these auction participants are either following a herd or believe that they can catch some market momentum and profit on a short-term trade. This is not a particularly effect manner to discount long-term value.
    Oct 28, 2015. 07:59 PM | 5 Likes Like |Link to Comment