Buy IBM, QCOM; Trade BAC; Sell JNJ

NEW YORK ( TheStreet) -- Aside from merger and acquisition speculation, nothing gets investors more anxious on Wall Street than earnings season.

This is a time when judgment is passed on our investment decisions. So as we enter the second week of these "midterm exams," we are going to looks at four companies that are essentially heading in three separate directions.

The first two are IBM ( IBM) and Qualcomm ( QCOM), which I think investors would be wise to add ahead of earnings.

There is also an excellent trade opportunity that might emerge in Bank of America ( BAC). And finally, we will look at why it might be time to lighten up on Johnson & Johnson ( JNJ). Although it remains a strong long-term play, I think the stock may have reached its high mark of the year.

Buy IBM

With Big Blue's stock trading at less than $200, Wall Street appears to be getting this story completely wrong.

First, despite ongoing concerns regarding corporate IT spending, the company's focus on business analytics and cloud services give it a vital role in the enterprise sector. This is in addition to its strong growth areas and forward-looking initiatives like its "smarter planet."

Secondly, the company deserves a considerable amount of credit for having successfully navigated through this new consumer-centric market. Only a short couple of years ago, IBM was teetering on the brink of irrelevance, while the market was being led by more nimble and agile players such as Apple ( AAPL) and Google ( GOOG).

The company is due to report its second-quarter earnings results on Wednesday after market close and I expect its recent trend of earnings beats to continue. Investors would be wise to accumulate shares prior to the announcement. For the quarter, investor should expect EPS to arrive at $3.43 on revenue of $26.36 billion, topping last year's quarter of EPS of $3.09.

It's hard to imagine that at one point the company languished under a stifling corporate culture, one created by the declining rule of the enterprise. However, today, IBM is once again a beacon of power and has led a type of resurgence that two quarters ago seemed unimaginable. Today, in addition to a strong product pipeline that is second to none, its aggressive expansion into emerging markets, as well as its recent acquisitions continues to make it one of the best long-term plays on the market. The stock is a buy.

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