International Business Machines Corp.

Every Thursday we bring you our best U.S. stock picks. You get our specific recommendation on the stocks we profile, with a full explanation of how we arrived at our opinion. You will read about stocks making moves you should know about, most often from coverage in our newsletter on U.S. investing, Wall Street Stock Forecaster.

IBM has a long history of drifting in and out of investor favour, mainly due to fear that new technologies will put it out of business.

However, IBM also has long history of shifting out of slowing businesses into faster-growing fields. For example, as computer prices fell in the 1990s, IBM expanded its more-profitable software and consulting operations. The company later unloaded its struggling personal computer operations, and is now selling its low-end server business. It will invest the proceeds in areas with better long-term potential, such as cloud computing and analytics software.

In addition, IBM’s well-known brand and global salesforce continue to give it a big advantage, particularly in developing countries.

INTERNATIONAL BUSINESS MACHINES CORP. (New York symbol IBM; www.ibm.com) started up in 1911 making machines that processed U.S. census data, as well as other industrial equipment such as time clocks and scales.

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INTERNATIONAL BUSINESS MACHINES CORP. $162 (New York symbol IBM, Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 997.6 million; Market cap: $161.6 billion; Priceto- sales ratio: 1.8; Dividend yield: 2.7%; TSINetwork Rating: Above Average; www.ibm.com) is selling its computer chip manufacturing operations to Globalfoundries Inc. However, IBM will not get any payment for these assets. Instead, it will pay $1.5 billion to Globalfoundries to take over this money-losing business. IBM has also agreed to buy chips from Globalfoundries for the next 10 years. This move is part of IBM’s plan to focus on its more-profitable computer services and software divisions....

INTERNATIONAL BUSINESS MACHINES CORP. $162 (New York symbol IBM, Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 997.6 million; Market cap: $161.6 billion; Priceto- sales ratio: 1.8; Dividend yield: 2.7%; TSINetwork Rating: Above Average; www.ibm.com) is selling its computer chip manufacturing operations to Globalfoundries Inc.

However, IBM will not get any payment for these assets. Instead, it will pay $1.5 billion to Globalfoundries to take over this money-losing business. IBM has also agreed to buy chips from Globalfoundries for the next 10 years.

This move is part of IBM’s plan to focus on its more-profitable computer services and software divisions.

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Every Thursday we bring you “Best U.S. Stocks.”. You get our specific recommendation on the stocks we profile, with a full explanation of how we arrived at our opinion. You will read about stocks making moves you should know about, from coverage in our newsletter on U.S. investing, Wall Street Stock Forecaster. IBM has a long history of drifting in and out of investor favour, mainly due to fear that new technologies will put it out of business. However, IBM also has long history of successfully shifting out of slowing businesses into faster-growing fields. For example, as computer prices fell in the 1990s, IBM expanded its more-profitable software and consulting operations. Later it unloaded its struggling personal computer operations, and now it’s selling its low-end server business. It will invest the proceeds in areas such as cloud computing and analytics software....

IBM has a long history of drifting in and out of investor favour, mainly due to fear that new technologies will put it out of business. However, IBM also has long history of shifting out of slowing businesses into faster-growing fields. For example, as computer prices fell in the 1990s, IBM expanded its more-profitable software and consulting operations. The company later unloaded its struggling personal computer operations, and is now selling its low-end server business. It will invest the proceeds in areas with better long-term potential, such as cloud computing and analytics software. In addition, IBM’s well-known brand and global salesforce continue to give it a big advantage, particularly in developing countries....

INTEL CORP., $33.70, Nasdaq symbol INTC, rose 8% this week after announcing better than expected first quarter earnings and a new share buyback plan. In the three months ended June 28, 2014, Intel’s earnings jumped 39.8%, to $2.8 billion from $2.0 billion a year earlier. The company spent $2.1 billion on share buybacks during the quarter. As a result, earnings per share rose at a faster pace of 41.0%, to $0.55 from $0.39. That beat the consensus estimate of $0.52. Overall revenue rose 8.0%, to $13.8 billion from $12.8 billion, beating the consensus forecast of $13.7 billion. Revenue from making chips for personal computers (63% of the total) rose 6.2%, mainly because businesses are buying new machines after Microsoft stopped supporting its older Windows XP operating system....

CANADIAN PACIFIC RAILWAY LTD., $209.09, Toronto symbol CP, gained 6% this week after reporting better than expected quarterly results. In the three months ended June 30, 2014, CP’s earnings jumped 47.2%, to $371 million, or $2.11 a share, beating the consensus estimate of $2.09. A year earlier, the company earned $252 million, or $1.43 a share. The higher earnings mainly resulted from CP’s plan to improve its efficiency with new locomotives, better tracks and software that optimizes train loads and speeds....

INTERNATIONAL BUSINESS MACHINES CORP. $194 (New York symbol IBM, Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.0 billion; Market cap: $194.0 billion; Price-to-sales ratio: 2.1; Dividend yield: 2.3%; TSINetwork Rating: Above Average; www.ibm.com) started up in 1911 making machines that processed U.S. census data, as well as other industrial equipment such as time clocks and scales.

The company now gets 55% of its revenue by designing computer systems and managing them for business and government clients. It typically does this under long-term contracts, which cuts its risk.

In the past few years, IBM has aggressively expanded its software business. It’s particularly interested in analytics software, which helps clients gather and analyze a wide variety of data. Software now supplies 27% of IBM’s revenue.

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ARCHER DANIELS MIDLAND CO., $47.85, New York symbol ADM, processes corn, wheat, soybeans, canola, flax seed, peanuts, cocoa and other crops into a wide variety of food ingredients, such as flour, oils and sweeteners. It is also the largest maker of ethanol from corn in the U.S. This week, the company agreed to buy Switzerland-based WILD Flavors, a privately held firm that supplies natural ingredients to over 3,000 food and beverage makers. Archer Daniels will pay 2.3 billion euros (or $3.1 billion U.S.) for WILD when the deal closes by the end of 2014. That’s equal to 10% of Archer Daniels’ $31.3-billion market cap (or the total value of all its outstanding shares)....

We still think investors will profit most—and with the least risk—by buying shares of well-established, dividend-paying stocks with strong business prospects. These are companies that have strong positions in healthy industries. They also have strong management that will make the right moves to remain competitive in a changing marketplace. Stocks like these give investors an additional measure of safety in today’s volatile markets. And the best ones offer an attractive combination of moderate p/e’s (the ratio of a stock’s price to its per-share earnings), steady or rising dividend yields (annual dividend divided by the share price) and promising growth prospects....