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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Spekulatius who wrote (55030)	3/10/2015 5:01:37 PM
From: Jurgis Bekepuris	Respond to of 78627

IBM - It is cheap though D/E is high. Bulls counter that most debt is vendor financing. I don't know if that's true. I am using Buffett for DD for two areas: 1. Buffett is allergic to debt and he's not vulture investor. He's not looking to pull Marty Whitman/Prem Watsa and buy IBM senior debt if equity collapses. So clearly he's fine with debt. So I'll assume debt is fine. 2. Most of IBM restructuring was done before Q4. Since Buffett continued to buy in Q4, it is clear that he approves of Ginny's 2014 actions. Again, he's not stupid and he does DD, he'd stop buying on a quarter if he did not like something. So I decided to give Ginny a benefit of doubt and assume that her 2014 was a dump year and that she can maintain or increase sales and earnings going forward. I don't particularly like her, I think she touts IBM too much, but I'm willing to see what comes next. Finally, my biggest concern was that IBM was too consulting-heavy. There's little point to get IBM consulting that is overpriced (likely) if you don't buy IBM HW/SW. After looking at their HW/SW sales, I think that current percentages of HW/SW to consulting are still OKish. I think they should be able to maintain HW/SW sales - at least they have a higher chance to maintain them than, for example, HP or Dell. So they might be able to maintain consulting too. I know your doubts about IBM and I share some of them. I am not sure if their focus on business analytics and security will pay off. I am not sure if Watson sub is not going to be a money hole. I don't have a very clear view. So I bought a pretty small position for now. I might change my mind at any point in time.