IBM $118.34 – New York symbol IBM

IBM $118.34 (New York symbol IBM; SI Rating: Above average) is the world’s biggest supplier of computers and information processing services. The company’s shift over the past few years into higher margin computer services and software is paying off. Revenues rose 12.8% in the three months ended June 30, 2008, to $26.8 billion from $23.8 billion a year earlier. Earnings rose 22.3%, to $2.8 billion from $2.3 billion. Earnings per share rose 28.7%, to $2.02 from $1.57, on fewer shares outstanding from share buybacks. IBM has increased its stock repurchase authorization by $15 billion. The company aims to buy back $12 billion worth of its stock in 2008, or about 8% of its market cap. IBM gets over 65% of its revenues from international operations, which offsets its exposure to the slowing U.S. economy. Sales in the latest quarter were especially strong in Europe (up 20%) and Asia (up 16%). Even so, revenues in the U.S. still rose 5%. IBM’s products and services have a lot of appeal for corporate customers looking to cut costs and improve productivity. That helps them maintain profits, even when sales are slowing. High research spending ($1.7 billion or 6.2% of sales in the latest quarter) will let the company keep adding profitable new products in a very competitive market. IBM is still a buy.

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One of the sweetest and most profitable pleasures of successful investing is to buy high-quality “value stocks” (or stocks that are reasonably priced, if not cheap, in relation to its sales, earnings or assets), then hold on to them as mainstream investors recognize the value and push up the share price.

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