This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

IBM Is an Investor's Best Friend: Fund Manager

BOSTON (TheStreet) -- IBM (IBM), set to report earnings after the close today, could be the cornerstone of a portfolio for every investor thanks to the company's dramatic transformation over the last few years, one mutual fund manager says.

Founded 100 years ago, IBM has transitioned from a maker of tabulators and time recorders to hard disk drives and ATMs to consulting services and artificial intelligence programs. Despite the sweeping change of product offerings and services over the past century, IBM has been a stable rock for investors of all kinds.

"The stock makes sense for a broad array of investors," says Tom Villalta, manager of the Jones Villalta Opportunity Fund (JVOFX). "There are a lot of things to like about IBM. It has wide appeal. This is a company that has continued to deliver."

In addition to stability, IBM's stock offers investors ownership of a company with a relatively low debt burden, a solid backlog of business and a strong position in the information technology industry. Villalta says that IBM, one of his 35 holdings, represents 4% of the portfolio, making it one of his fund's largest positions.

While investors have been trained to measure a company's earnings per share and revenue against analysts' estimates, a bigger focus should be on IBM's major improvement in gross margins. IBM has boosted its gross margin from 37% a decade ago to above 46% last year. Analysts are forecasting the IBM's gross margin will rise to 46% in its second quarter from 44.5% last quarter and 45.6% in the year-ago period, according to a poll by Thomson Reuters.

"They've really repositioned the company to take advantage of more differentiated product offerings and getting out of more commodity-like businesses," Villalta says. "The move into services makes it easier for IBM to differentiate itself. It allows for higher margins and higher returns on equity. We really like that and it supports a higher valuation."

>>For upcoming earnings and estimates, see our Earnings Calendar.

One-hundred-year-old companies are rarely thought of as growth companies, but Villalta makes a case for IBM as an attractive growth play. "It's a classic growth stock at a reasonable price," he says. "It's something you can buy and hold onto for a number of years and experience growth in the U.S. economy."

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,563.30 -317.06 -1.88%
S&P 500 1,930.67 -39.40 -2.00%
NASDAQ 4,369.7730 -93.1290 -2.09%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs