Just over a week ago we noticed that the guys and gals over at IBM wrote us a nice little check in the amount of $107.26 ($1.40 X 76.617). We really like IBM. Of course you’re not supposed to ever fall in love with your stocks or get all emotional over them. That’s why we started Quantigence. We want to be as objective as possible! Still, the Q-Score methodology picks IBM as our highest rated holding and in our minds we have no problem with that at all.
As we’ve talked about before, our backgrounds are in IT and we are all too familiar with how technology is what will drive all the superior returns for stocks in the years to come. There are some truly exciting technologies on the horizon these days like artificial intelligence, cloud computing, and “big data”. IBM is playing in all these growth areas but is priced like a value play at the moment. The reason for this is that their revenues continue to slide every year as they try and turn the company around through reorganization while debt keeps rising.
IBM is in no danger of not being able to increase their dividend anytime soon because they’ve managed to keep their payout ratio so low.
Even with falling revenues, they are a cash machine and with a 3.5% yield that sits above our target yield of 3% we’re happy to keep taking those dividend checks and exercise some patience while we wait for the turnaround to take full effect. One criticism you might have of our Quantigence DGI Portfolio is that it is “technology light” and you would be correct in saying that. However if you want an investment strategy that is quantifiable and objective, you can’t just overweight tech because you feel like it. The truth is we don’t have many options anyways in the technology sector using our filtering criteria. That’s why we have a 401K that is heavy on tech with names like Google, Apple, and Illumina, all of which who IBM works with. Let’s hope this turnaround strategy works!