Tuesday, February 9, 2016

Stock bought February 2016: IBM


IBM, an American IT-service giant

IBM is one of those American giants that are today strongly disliked by the market. Each quarter the revenue is dropping, the earnings drop and yeah, the margins are not increasing still... I can buy this company today at a P/E of 9 with a dividend yield of 4% which correspond to 37% of their earnings. And well... Ginni Rometty are by some considered to be a bad manager but that is in my opinion wrong. She is excellent and as sharp as a titanium needle. Wall Street are crying about the IBM buyback program but for crying out loud. Should you run out and buy small IT companies at a P/E of >40 or simply convert (educate) your workforce into the new service business while buying back your own shares at a P/E of 9? I know that Wall Street wants things to be fast so they would for sure favour acquisitions like mad on one side and downsizing on the other. That is to me, to put it bluntly, stupidity in a nutshell.

No, no, she is doing everything correct. She allows the process to take the time it takes. The market hates them ok, then we increase the value for our shareholders by paying an excellent dividend + buying back shares. As a shareholder I do not complain that I am getting so much value (dividend + buyback) for each euro I put into this massive oil tanker.

For me IBM is an easy investment. It is an excellent company with an excellent management. IBM made 13.2 billion USD in earnings last year and that was not a great year for IBM. If a company are having those kind of cash flows during bad years then what will it look like in a good one?

I therefore decided to buy nine more shares in IBM and I paid in total (including fees) 1024.81 €. This means that I now have 25 shares in IBM and I have made a total investment of 3274 € which comes down to around 130.96 € per share including fees.

To find out more concerning IBM then please check out analysis of IBM 2016.

If you want to see my current Stock Portfolio then click on the link but the portfolio will not be fully updated until the end of the month.

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