Comprehensive IBM stock review

Comprehensive stock analysis of IBM stocks

IBM is a technology company that has interests in Information technology industry. The tech space has been dynamic with rapidly changing technology and entrance of new competitors. IBM has been under pressure from new competitors keen to take over the market for its core businesses.


 Stock rating

IBM has had an operating margin of 24.4%. This is about 6% higher than the average operating margin for the last three years. Its main competitor has had an operating margin of 21.5% in the last year with Return on Invested Capital standing at 24%.

IBM stock’s price to earnings ratio stands at 13:4 against and an industry average of 14:3x. It has had a revenue decline of about 4.4% on average in the last three financial years. Its stock has a debt to equity ratio of 3.4 with the debt standing at 40804 million dollars. Furthermore, its stock is trading at a price to book ratio multiple of 10.7x against a weighted industry average of 8.


 Company background

IBM was founded in 1911 and has a long history that extends well over a hundred years. It has never reduced its dividend payments for the last 22 years since 1993. One of its biggest is the famous investor Warren Buffet since the great recession of 2007.

 IBM primary operating areas includes Global Technology Services, Global business services, Software, Global Financing, Technology, and systems. According to its most recent financial release software accounted for 48 % of the company gross profit, Global Financing took 2%, Systems and Technology took 8%, Global Business Services took 12% while Global technology services took 30%. Thus, the most important business segments are software and Global Technology and services that combined, accounts for 78% of the company’s profit.

 Despite the software segment being the largest profit earner, its earning in the last quarter of the last year came down by 7% while pre-tax income went down by 11%. According to the company, it is reinventing itself for better margins later this year. However, there are all indications that its major competitors are outplaying it in the segment.

Its second highest earner, Global Technology services offers outsourcing services, Global Process services, Cloud services, integrated Technology services and Technology Support services. IBM restructured the segment early in 2014 and divested from customer care outsourcing and System X. Due to restructuring, the segment looks flat in the last quarter of last year.


 Future prospects

Within the last decade, IBM has compounded earning-per-share at 12.4% a year. It has experienced strong growth since early 1990s giving it a chance to focus on higher value business. Unfortunately, since 2012, it has slowed down in growth. More important to note, its earnings per share has come down to around 5% a year. It seems the company is losing ground to its competitors

Analysts are having hard time determine growth prospects of the company given that it is transitioning to big data analysis and cloud based business segments. Its low price to earnings ratio shows that the company has been greatly undervalued.


Final thoughts

IBM is still high quality business and has a strong 2.7% dividend yield. The weak results may be due to its transition. However, the segments it is looking at are better investment segments that could return it to profitability. Anyone buying IBM stocks should be patient during this time of transition. It is a stock to watch when the company goes back to growth as it had projected.

Is at all just Monkey Business?

Some days, the stock market feels like a colossus of finance. A huge network of brilliant ideas, and those with the intelligence to read that epic book are vastly rewarded.

Other days, though. It just seems like a jungle.

I just wanted to mention an article I found that sends a different message than normal to those of us who venture into this vast economical jungle.

In a Forbes article, dated 12/20/2012 and titled "Any Monkey Can Beat the Market." Malkiel Burton states “A blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by experts.”

Later, Rob Arnott, CEO of Research Affiliates goes on to say. “Malkiel was wrong, The monkeys have done a much better job than both the experts and the stock market.”

The study goes on to explain that the monkeys were picking from smaller market cap companies, which contributed to their growth potential, and it also underlines a variety of factors to explain the study, but the main point holds true. Sometimes, the stock market is just a dart board in a jungle.

Quotes referenced from http://www.forbes.com/sites/rickferri/2012/12/20/any-monkey-can-beat-the-market/

PLUG Power, Violently unstable? or Insanely profitable?

PLUG Power has always been a stock of interest to me. It is the leader in a group of companies I refer to as the "Clean Crew".

 This group of companies focuses on alternative energy sources mainly in the automotive industries. Similar Companies like Ballard Power focus primarily on Hydrogen Fuel cells for forklifts.

Plug works to replace existing acid batteries with Proton Exchange membrane fuel cell technology mainly in industrial vehicles, but this is not the important part.

In my experiences, PLUG is extremely susceptible to positive or negative news releases. Its prices fluctuate wildly in either an upward or downward direction quickly after drastic announcements.

After a news release that Ballard Power and PLUG Power would be signing a contract with Wall Mart to supply 1600 fuel cells to their warehouse forklifts the stock saw unprecedented gains over a very short amount of time.

I was lucky enough to capitalize on a good chunk of this time and make a portion of money which was nothing to scoff at (at least in my opinion) and i am looking to do it again.

On Tuesday the 17th PLUG releases its quarterly report, and while there is mixed sentiment towards their position, one thing is very clear, if they release information of a similar contract (one such contract with Coca Cola has been in the rumor mill for some time now) there will be immediate and massive gains.

I have a special place in my heart for PLUG power and thus will be keeping a very close eye on the news as they release their market report, with any luck they have broken through to profitability this quarter and will be taking off back to their long forgotten highs.

It is certain that PLUG has massive potential, lets see if they cant get back on the road to realizing it. 

Provided is a Link to an article from InvestorPlace about PLUGS upcoming reveal and what it could potentially hold.

http://investorplace.com/2015/03/2-trades-volatile-plug-power-inc-earnings/

Some Basic Terms for new Traders

Ok, so today, while in a conversation with a friend who had brought a company to my attention which he thought could be profitable, something occurred to me.

When I first entered into the world of stock trading, as a wide-eyed innocent newbie, I had NO idea what half of the terms meant. Or even where to start in order to learn them. 

So here it is, my attempt at a small but comprehensive vocabulary post to help you get a little better understanding of the language of stock trading.

Bears vs. Bulls

Bears versus Bulls is like saying up versus down. A "Bear", is a trader or holder who is expecting and banking on the price of whatever stock he/she is holding to go down.

On the reverse, "Bulls" are holders who are expecting and hoping for the priuce to rise.

These terms will often be used to describe market movements. IE. "Today there was a lot of Bearish pressure on Apple, dropping the price significantly."

Floor vs. Ceiling

The "Floor" of a stock can be seen when the price is falling. As a stock drops in price it will hit a certain level in which the bulk of buyers will begin to assume that it cannot drop anymore and that it is a smart time to buy. As this happens the price will stabilize, and then begin to rise again, as if a ball were bouncing off of the "Floor" of a room.

The "Ceiling", likewise, is the price reached as a stock rises where investors begin to think that it has gone as high as it will and that it is time to sell, the price will stop rising as the "Ceiling" is hit and the price then begins to fall.

Support levels

"Support levels" are specific prices where there are pre-existing buy or sell orders. Lets take Apple for example, the stock is trading at levels around $ 124 USD. It would be reasonable to assume that since Apple, (AAPL) is a large, and fairly stable company that the "Support levels" are fairly close to the current price. 

I would estimate that there would be significant UPWARD support should the price drop to $ 120 USD. And significant DOWNWARD support should the price reach $ 130 USD. 

Similar to the Floor and Ceiling, support levels are prices where the direction and trend of the stocks movements are tested.

IPO

An IPO (Initial Public Offering) is when a company that has previously not been traded publicly, IE. a company that is not able to be purchased on stock broker sites, and is likewise not available to the general public, makes its first appearance. 

A companies IPO is the first opportunity to purchase the stock at a preset value. KING Digital, the makers of Candy crush, for example, began their IPO at just over $ 22 USD. By the end of the day however they were trading almost 20% lower, at around $ 18 USD. 

It should be noted that when a company offers its IPO there is often significant price change as the shares offered are either bought up quickly and sought after or stagnate because of low public interest. 

FCEL is one to be watched.

FuelCell Energy Inc, FCEL, while not a company I am investing in at this moment is one I am watching closely. I am hoping to see growth of at least 15% in the coming 7 - 10 days. 

FCEL Has been working to secure partnerships with big name auto manufacturers over the past few months and even one of these deals could see a huge upswing in their share price.

I have chosen to mention FCEL because it is part of the "Clean energy Crew" as I call it. A group of green friendly energy stocks that are linked directly to changes in public opinion when it comes to energy use, and in a world where an eco-friendly attitude is more and more mainstream, a cluster of investments that may pay off profitably.

The screenshot is for a visual of the volatility potential of the stock.

ZGNX: could it make a lot of Money?

My newest short term investment is Zogenix, Inc. I have listed a buy for 100 shares at the shown market price, executed at 4:46 PM on Thursday March 12th.

I expect reasonable growth within the next 5 to 7 days. Upwards of 10% maybe more.

Zogenix took a hit recently but as I analyze the company I suspect it could be valued at about double its current price. In the short term that growth may not be fully realized but I expect a profitable increase in the near future.

As the situation develops I will post more information and screen shots as this is a company I am quite interested in.

ENIP: Testing the waters for a big gain

This is my first entry point. Endeavor IP Inc. (ENIP)

I am entering a buy order for market value at exactly 11:52 AM on Saturday March 7th. For the shown price of 0.0014

My Buy amount is 100,000 shares for a total price of $ 140.

I am hoping to turn a profit of roughly 20 - 30% come Monday/Tuesday of the coming week.

My reasons for entering into this trade are that ENIP is at a nearly all-time low, hitting what I believe to be a support level which will not be broken. It also demonstrates high volatility and overall I have a strong gut feeling that it will rebound to 0.0017 - 0.0018 during the next 3 to 5 days.

I will update this post during the next 3 - 5 days with my exit time and price, as well as the required screen shot.

Ok, I posted a sell at the above screenshots market price of $ 0.00170 at exactly 4:21 PM on Monday March 9th.

As I had hoped, I drew a rough 20% profit, on par with my gut instinct. I will however, be steering clear of this stock in the future as it is an unstable creature who most likely profited short term simply due to aggressive marketing.