IBM

Update: Digging Into the Valuentum Dividend Cushion

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Sign Up to Receive our Dividend Growth Newsletter! Add the High Yield Dividend Newsletter to Your Membership! History has revealed that the best performing stocks during the previous decades have been those that shelled out ever-increasing cash to shareholders in the form of dividends. In a recent study by Ned Davis Research, S&P 500 stocks that initiated dividends or grew them over time registered roughly a 9.6% annualized return since 1972 (through 2010), while stocks that did not pay out dividends or cut them performed poorly over the same time period.  Such analysis is difficult to ignore, and we believe investors may be well-rewarded in future periods by finding the best dividend-growth stocks out there. As such, we’ve developed a rigorous dividend investment … Read more

Thank you…

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By Brian Nelson, CFA Earlier this week, I received an email from a colleague and valued member of our services. I wanted to share it here for others to read. I haven’t included his name, but if he wants me to, I can add it in. It is filled with wisdom, experience and kindness. And it really made my year to read his words. The Valuentum community, I believe, is the best community of investors out there. Sir, if you do happen to read your own email on our site, we very much have appreciated your feedback, and we hope to continue to live up to your praises. We are dedicated, and our team has been rejuvenated by your words. … Read more

Could IBM and Hewlett-Packard Be In a Bidding War for 3D Systems?

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First, it was reported on October 23 that Hewlett-Packard (HPQ) CEO Meg Whitman revealed that her company has plans to enter the 3D printer market in the middle of 2014. Whitman’s commentary was striking given the conviction in her intentions, which leads us to believe she is looking for a potential target that may fit well within HP labs’ research trajectory. The snail’s pace of internal innovation at Hewlett-Packard in recent years leads us to believe that Whitman will inevitably look to acquire the technology. It remains unclear, however, whether the executive suite at Hewlett-Packard has finalized the make-or-buy decision. Potential targets such as 3D Systems (DDD), Stratasys (SSYS), and ExOne (XONE) traded off on this particular news, as market participants took the … Read more

4 Quotes That Suggest This Economy May Not Be So Hot

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The stock market’s recent performance has been puzzling to say the least. Not only are valuations stretched, but it seems like with each passing trading session, the broader equity market manages to edge out new highs (regardless of underlying business fundamentals). Though we’re happy to see the market march ever higher, a number of firms on our radar have issued some cautionary comments that are worth noting. Over the intermediate- to- long-term, corporate fundamental outlooks will trump any near-term rise in sentiment caused by the re-scheduling of yet another debt ceiling debate (this one now scheduled for February 7). We’re paying close attention to corporate activity. IBM (IBM) “From a geographic perspective our challenge this quarter was in growth markets, … Read more

IBM Reports Second Quarter; Raises Operating Outlook for 2013

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On Wednesday, IBM (click ticker for report: ) reported second quarter results that were roughly in line with our expectations. Operating non-GAAP diluted earnings per share (excluding workforce rebalancing charges) advanced 8%, to $3.91, despite revenue declines of 3%, which were led by a 12% drop in ‘Systems and Technology’ sales and a 4% fall off in ‘Services’ revenue. Adjusting for currency, key branded middleware (WebSphere, Tivoli, Social Workforce Solutions—Lotus), z mainframe revenue, business analytics, ‘Smarter Planet’, and cloud revenue were up 10%, 11%, 11%, 25% (during the first half of the year), and 70% (during the first half of the year), respectively. The firm’s operating non-GAAP gross margin advanced 110 basis points in the period, to 48.7%. On a … Read more

IBM Reports Solid Fourth Quarter; Remains on Track to Reach Earnings Goals

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On Tuesday, IBM (click ticker for report: ) reported strong fourth-quarter results that showed flat revenue growth but solid non-GAAP operating earnings-per share expansion (up 14%) and GAAP earnings-per-share expansion (up 11%). Software sales advanced 4%, while services revenue fell 1%, both measures adjusted for currency. The firm’s systems and technology revenue fell 1%, but z mainframe revenue jumped an impressive 56%. Non-GAAP gross margin reached 52.3% of sales, up 2.1 percentage points from the year-ago quarter. Free cash flow increased $0.6 billion to $9.5 billion (an impressive 32.4% of sales in the period). Importantly, services backlog advanced roughly $1 billion, to $140 billion, after adjusting for currency. For all of 2012, IBM achieved record profit, earnings per share, and … Read more

Dell Gets No Respect from the Street; Is it Time to Go Private?

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Rumors surrounding computer maker Dell (click ticker for report: ) going private stole the show yesterday afternoon. Several reports indicate that CEO and founder Michael Dell could be leading the charge to take the company private as the market continues to saddle the firm with a low multiple. We peg Dell’s fair value at $18 per share, so we completely understand what private equity investors are looking at. We think the deal makes a lot of sense for shareholders, but not necessarily for the company. Shares have been steadily declining as the firm’s core PC business fades, and we believe plenty of shareholders would love to be bailed out by a private equity bid that values the company at a … Read more

Fiscal Cliff Averted; Aerospace Rallying

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After a volatile December, two of our favorite aerospace names, Astronics (click ticker for report: ) and EDAC Technologies (click ticker for report: ), are rallying significantly after a deal was finally reached to avert the fiscal cliff. Precision Castparts (click ticker for report: ), which had steadily moved higher during the fiscal-cliff ordeal thanks to optimism surrounding its planned acquisition of Titanium Metals (TIE), is also seeing strength today. We assumed both profit taking and overblown fears of defense cuts were the culprit behind the increased volatility, and it seems as though that could be the case. We continue to see substantial upside at these firms thanks to the massive, multi-year commercial aerospace backlogs of the large airframe makers. Our Best Ideas portfolio … Read more

You Are Ahead of the News As a Valuentum Member

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Remember When We Said Economic Prognosticators Were Off Their Rockers? From the September 2012 edition of our Best Ideas Newsletter (see page 2), released September 15, 2012: “Could you imagine if you had listened to bond-king Bill Gross (please note he is not the equity king), Marc Faber (author of the Gloom, Boom & Doom report) or the Economic Cycle Research Institute (ECRI), which called for a recession in September 2011 – some 30% in the S&P 500 ago (yes, 30%!). Aside from being incorrect, bearish economic prognosticators fully admit that their expectations have little to do with what may happen to the equity markets in the future (as Bernanke’s unlimited QE has shown). Still, such admissions do not stop … Read more

FAQ: Why Doesn’t the ‘Percentage Undervalued/Overvalued’ Match Up to the Actual Discount/Premium to Valuentum’s Fair Value Estimate of the Company?

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We view the intrinsic value of a firm as a range, not a single point estimate. So instead of us saying that a company is worth exactly $55 per share, for example, instead we’d say it is worth between $50 (low end) and $60 per share (high end) — think of this range as our margin of safety. We use a margin of safety due to the inherent uncertainty of predicting with absolute precision a firm’s future free cash flow stream — a firm’s future free cash flows determine our estimate of the company’s intrinsic value, and the future is not known yet. As a result, the ‘percentage undervalued/overvalued’ (as shown on our 16-page reports) is calculated by comparing the firm’s current price with the … Read more