Editor's Note: In this edition of "360 Degrees,"
after its surprisingly strong earnings report. Is it not too late to buy, and should holders stand pat or take money off the table?
has always believed that offering a wide variety of opinions and viewpoints -- rather than a monolithic "house view" -- helps readers make better-informed investment decisions. In that spirit, we bring you "360 Degrees."
"360 Degrees" is a feature that takes advantage of our varied stable of contributors to
, who offer analysis of stocks and the markets from all angles -- fundamental vs. technical, short-term trader vs. long-term investor.
Click on the following link for information about a
free trial to
IBM Re-Emerges as the Go-To Hardware Stock, by Jim Cramer
Originally published on
on Oct. 18 at 8:37 a.m. EDT
IBM delivers a classic UPOD -- underpromise, overdeliver -- with its
third-quarter earnings beat. The estimates finally got down to where they could be beaten. The growth was finally so
last year that it looked good this year. The company can now claim that the departure of the low-margin PC business is exploding margins. And voila, you have a $90 stock.
For the longest period of time, IBM was
hardware stock you had to try to own. You couldn't own
under former CEO Carly Fiorina. Despite what she might be saying about how well she did with the company, of course, she was a disaster.
: a joke.
had both run out of gas.
But IBM became this monster guessing game: good quarter, bad quarter, horrible quarter, great quarter.
That's why this move is worth noticing -- this is the first move up in a long time that was actually preceded by an up move. Follow me on this. Usually IBM runs up ahead of a quarter, and if the quarter is good, it goes down "because it ran up," and if it is bad, it crashes. That's why I was always favoring buying puts underneath the stock. No matter what the results, if the stock had ran ahead of the quarter, it got cracked.
Not this time.
So here's what I think happens. IBM once again becomes the stock people want to try to buy because of its low valuation, balance sheet and momentum. IBM could be like
, two stocks that never looked back.
My prediction: A point or two down -- maybe -- and then up to par because buyers are desperate for a new hardware name to own
H-P, and they just found it.
At the time of publication, Cramer was long Hewlett-Packard.
Five Good Things About IBM, by Barry Ritholtz
Originally published on
on Oct. 17 at 2:04 p.m. EDT
Here are five things about IBM you should (but may not) know:
IBM has beaten earnings estimates by low single digits for the past five quarters;
Relatively cheap 16 trailing earnings vs. 23 for the Dow, and 25-30 for a lot of large software names;
Even though software is only 20% revenue, it's about 40% earnings. Given that nearly half of earnings are software-related, you would think the stock deserves a better multiple;
Huge Patents: IBM leads the U.S. in patent awards (for 13 years in a row); This is potentially a rich pipeline for the company in the future. It currently garners about $1 billion a year in (high-profit) revenue from licensing;
It's a large-cap defensive name that should do well (relatively speaking) in any downturn.
On Wednesday morning after the earnings report, Ritholtz added:
We still like it as a defensive name in the event of an economic slowdown, and we are not sellers here.
However, anyone who bought some based on yesterday's discussion cannot exactly be faulted if they were to peel off a little here into a nearly $5 overnight pop.
At the time of publication, clients of Ritholtz held positions in IBM
Bullish Is as Bullish Does, by Dan Fitzpatrick
Since its July low, IBM has advanced by more than 25%. This morning's gap resulted in an opening print well above the upper Bollinger band, which is two standard deviations above the middle Bollinger band, the 20-day moving average. In fact, the stock opened three standard deviations above the middle Bollinger band.
When a stock advances to this extent, everyone starts thinking, "regression to the mean," and the bulls become passive. They're not interested in buying at current levels because the stock is so extended. In fact, many traders with more short-term orientation will be inclined to sell into this rally and take profits. I'd imagine that short-selling activity will also increase as the bears begin to believe that this is as good as it gets for IBM.
That sets up an interesting dynamic going into today's close. If demand remains strong enough to soak up all the supply created by today's big move, I'd expect selling interest to decline a bit and IBM will move even higher. After all, today is the bears' best chance of selling at a high level, so they are likely to be quite aggressive. If they can't push the stock below today's low of $90.10, then that aggression will be tempered by doubt.
So watch the close today. But don't forget the other side of the equation -- if the stock does close lower, it will likely fill that gap. Interestingly, if the gap is filled, the stock will be right back at the upper Bollinger band. Combined with a strong RSI reading, even a pullback to fill would keep the stock in full-blown rally mode going into what is typically the strongest part of the year.
I continue to maintain a bullish bias on IBM -- I just can't make a credible bearish argument when the stock is this strong. Simply put, moving higher is the most bullish thing a stock can do, and IBM is moving higher.
At the time of publication, Fitzpatrick was long IBM.
For Your Viewing Pleasure
's Robert Martorana explains on
why he believes
IBM isn't expensive yet.
Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO.
Fitzpatrick is a freelance writer and trading consultant who trades for his own account in Encinitas, Calif. He is a former co-manager of a hedge fund and teaches seminars on technical analysis, options trading and asset-protection strategies for traders and business owners.
Barry Ritholtz is the chief market strategist for Ritholtz Research, an independent institutional research firm specializing in the analysis of macroeconomic trends and the capital markets. Ritholtz is also president of Ritholtz Capital Partners, a New York-based hedge fund.