International Business Machines$240 billion information technology giant International Business Machines (IBM) has done a good job of keeping pace with a fast moving market this year. Shares of the firm have rallied 14.5% since the start of January, with 1.61% dividend yield tacked on top. Now, with third-quarter earnings slated for next week, Big Blue is one Rocket Stock name that looks primed to push ahead of the S&P.
IBM is one of the biggest IT firms in the world, selling its computer hardware, software and services to other businesses around the globe. The firm is the league leader in the mainframe business, a complex business that has high barriers to entry, and it's able to trade off of its name to generate heftier premiums for its services than many peers. That's particularly true given the fact that IBM has a bigger service catalog than other IT firms. As a result, it's able to pull more value out of its customer Rolodex than most rivals can.The past decade has been volatile for the tech industry, but IBM has proven prescient. The company unloaded its personal computer unit to Lenovo back in 2005, well before the commoditization of PCs was a major concern for most computer makers. In its place, the firm moved into lucrative (and high margin) consulting jobs and hardware sales where it could get deeply integrated into clients' operations. IBM also has an impressive history of returning cash to shareholders in the form of dividends and buybacks; last year, the firm spent $16.07 billion to boost shareholder returns. Investors should pay attention to those priorities.
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