Guest Grey512 Posted November 6, 2015 Share Posted November 6, 2015 I am (relatively) new to IBM. I listened to Rometty's session at the Dealbook conference (it's on YouTube) and was not impressed. Felt she was the among the least straightforward of all the speakers there. Did not give direct answers to the questions posed by Sorkin. Rometty does not feel like an Outsider to me. Druckenmiller may be spot on. Link to comment Share on other sites More sharing options...
CorpRaider Posted November 6, 2015 Share Posted November 6, 2015 Yeah, I feel compelled to take a scalding shower after listening to their conference calls. haha. Link to comment Share on other sites More sharing options...
thefatbaboon Posted November 6, 2015 Share Posted November 6, 2015 Yeah, I feel compelled to take a scalding shower after listening to their conference calls. haha. +1 Poor woman is very over caffeinated. Link to comment Share on other sites More sharing options...
Simple Investor Posted November 6, 2015 Share Posted November 6, 2015 I didn't' think it was bad, in fact I thought it was impressive. Sure she doesn't exactly know when a return to growth is going to happen -and focused on what they did grow over the past 3-5 years instead. I thought the info on the banks and airlines was insightful. IBM talks like they care more about shareholders than 99% of publically traded companies. She doesn't want to make bad deals. I'd be curious to see how much goodwill has been written off over the past 3-5 years. I think (not people on this board) she experiences gender bias. I wonder if a man was running IBM if there would be a different view on the company. Just my opinion. She said she has more women in the company than any other tech company. That was interesting. Sorkin alluded to the fact the companies run by women are more apt to be attacked by activist investors. I think she has a great chance of having history being revised to show her as a great leader, shareholder friendly, and a great capital allocator. Link to comment Share on other sites More sharing options...
arcube Posted November 6, 2015 Share Posted November 6, 2015 I am reading the BEST investment/business/economics book I have ever read in my life - Zero to One by Peter Thiel (founder of Paypal). This book has changed my investment style and is an eye opener. I can't recommend it highly enough. Reading it will accelerate your investment and business skill 1000%. I came across Palantir in it - 'Ten years ago, we set out to create products that would transform the way organizations use their data. Today, our products are deployed at the most critical government, commercial, and non-profit institutions in the world to solve problems we hadn’t even dreamed of back then.' https://www.palantir.com/about/ http://www.cnbc.com/2014/06/17/disruptors-in-2014-palantir.html http://www.slideshare.net/TheodoreHeiser/palantir-company-presentation This sort of reminds me of what IBM & Watson are trying to do with Analytics. In fact, it almost looks like a clone of Watson. Palantir was mentioned in the book as the 2nd most valuable investment from the 2005 Founder's Fund that funded Facebook. If this is the case, either IBM has a very bright future ahead in this field or it may be eaten for lunch by this start-up. Either is possible But it does suggest to me that IBM is fishing in the right pond. IBM has been fishing in this bowl for a very long time and even before it purchased i2. Simply put the culture needed today to thrive in tech (speed to market, disruption quotient, flexibilty, moonshots etc.) is mostly absent/hard at IBM. Not sure if Palantir can eat it's lunch. I have heard that Palantir will ultimately have some issues due to limited access to capital - can't see itself as a public company and private capital at these valuations will not continue for ever. Link to comment Share on other sites More sharing options...
AzCactus Posted November 6, 2015 Share Posted November 6, 2015 I didn't' think it was bad, in fact I thought it was impressive. Sure she doesn't exactly know when a return to growth is going to happen -and focused on what they did grow over the past 3-5 years instead. I thought the info on the banks and airlines was insightful. IBM talks like they care more about shareholders than 99% of publically traded companies. She doesn't want to make bad deals. I'd be curious to see how much goodwill has been written off over the past 3-5 years. I think (not people on this board) she experiences gender bias. I wonder if a man was running IBM if there would be a different view on the company. Just my opinion. She said she has more women in the company than any other tech company. That was interesting. Sorkin alluded to the fact the companies run by women are more apt to be attacked by activist investors. I think she has a great chance of having history being revised to show her as a great leader, shareholder friendly, and a great capital allocator. A company being run poorly ought to be attacked by activist investors based on its' performance. While I'm not a genius regarding IBM by most metrics IBM appears to be underperforming. Over the last 5/10 years they have underperformed the S&P 500 and they seem to lack the imagination and innovation that other companies have. Nothing is wrong with hiring women or men, but their is something wrong with generating inadequate returns over long periods of time. Link to comment Share on other sites More sharing options...
KCLarkin Posted November 6, 2015 Share Posted November 6, 2015 Over the last 5/10 years they have underperformed the S&P 500 They have under-performed the SP500 since 2012 but not over 10 years. You are likely ignoring dividends. IBM outperformed over the last 10 years despite a massive multiple contraction (versus mild expansion for SP500). IBM stomped all over the SP500 in the underlying fundamentals. Past performance is no guarantee of future performance... Link to comment Share on other sites More sharing options...
AzCactus Posted November 6, 2015 Share Posted November 6, 2015 Over the last 5/10 years they have underperformed the S&P 500 They have under-performed the SP500 since 2012 but not over 10 years. You are likely ignoring dividends. IBM outperformed over the last 10 years despite a massive multiple contraction (versus mild expansion for SP500). IBM stomped all over the SP500 in the underlying fundamentals. Past performance is no guarantee of future performance... Not based on the link from Morningstar (see below): http://performance.morningstar.com/stock/performance-return.action?t=IBM Link to comment Share on other sites More sharing options...
dwy000 Posted November 6, 2015 Share Posted November 6, 2015 Over the last 5/10 years they have underperformed the S&P 500 They have under-performed the SP500 since 2012 but not over 10 years. You are likely ignoring dividends. IBM outperformed over the last 10 years despite a massive multiple contraction (versus mild expansion for SP500). IBM stomped all over the SP500 in the underlying fundamentals. Past performance is no guarantee of future performance... Not based on the link from Morningstar (see below): http://performance.morningstar.com/stock/performance-return.action?t=IBM They've tripled earnings per share over the same 10 year period. The underperformance of the stock while tripling earnings is why it's a buy today. Link to comment Share on other sites More sharing options...
Dalal.Holdings Posted November 6, 2015 Share Posted November 6, 2015 Call us crazy, but we think that stocks that grow earnings while underperforming the market for short periods of time (yes, 5 years is short to us) can be incredible opportunities. Link to comment Share on other sites More sharing options...
scorpioncapital Posted November 6, 2015 Share Posted November 6, 2015 Berkshire IBM holding at Sep 30/15 = 11.7 billion. Closing price was $144.97 So they owned - 80.7 million shares. At Q2 they owned about 79.3, so guess they added 1.5 million shares in Q3...Say $200 million-ish worth. Link to comment Share on other sites More sharing options...
KCLarkin Posted November 6, 2015 Share Posted November 6, 2015 Not based on the link from Morningstar (see below): http://performance.morningstar.com/stock/performance-return.action?t=IBM Yes, if you reinvested dividends SP500 won. If you bought and held for 10 years, IBM won. Link to comment Share on other sites More sharing options...
AzCactus Posted November 6, 2015 Share Posted November 6, 2015 Call us crazy, but we think that stocks that grow earnings while underperforming the market for short periods of time (yes, 5 years is short to us) can be incredible opportunities. So there are two issues right. One is the underperformance that has already occurred and second is the opportunity moving forward. Over the past 5 years IBM's stock has underperformed the SP 500 by 1200 bp per annum. If I'm not mistaken that would require massive outperformance moving forward just to break even. Further, a business that is consistently reducing revenue doesn't strike me as ideal. Anyways like I've heard that's what makes a market. Link to comment Share on other sites More sharing options...
Picasso Posted November 6, 2015 Share Posted November 6, 2015 The only thing that keeps me out of IBM is Ginny. That lady is like a deer in the headlights. I would hate holding the shares and listening to her on conference calls. F*%! that.... That said IBM has the potential to be like Altria. For as much as investors called the demise of Altria, the returns from that flat/declining business have been incredible. I believe MO/PM have the best risk adjusted returns of any large cap stock over the past couple decades. You need a WMT moment for IBM. Fire Ginny, fix the culture, invest in your employees, and take a hit to the stock for a few years. Then buy up shares with excess capital and get away from all this financial foolery. Do it now before this turns into the next Blackberry. Link to comment Share on other sites More sharing options...
KCLarkin Posted November 6, 2015 Share Posted November 6, 2015 Call us crazy, but we think that stocks that grow earnings while underperforming the market for short periods of time (yes, 5 years is short to us) can be incredible opportunities. So there are two issues right. One is the underperformance that has already occurred and second is the opportunity moving forward. Over the past 5 years IBM's stock has underperformed the SP 500 by 1200 bp per annum. If I'm not mistaken that would require massive outperformance moving forward just to break even. Further, a business that is consistently reducing revenue doesn't strike me as ideal. Anyways like I've heard that's what makes a market. Just remember that your version of under-performance is mostly just multiple compression for IBM and expansion for SP500. IBM earnings +30% versus +40% for SP500 over past 5 years. IBM the business has actually only under-performed for past two years. -- Or more precisely, your "past" underperformance is really Mr. Market pricing in FUTURE underperformance. Link to comment Share on other sites More sharing options...
marcowelby Posted November 6, 2015 Share Posted November 6, 2015 My long term Warren view on IBM: Increases in earnings over the long term : Massive buybacks: IBM over the years: Year Earning per share($/sh) Shares numbers(millions) 1995 $1.81 2276 2005 $4.87 1627 2014 $11.97 1010 Marc Link to comment Share on other sites More sharing options...
Dalal.Holdings Posted November 7, 2015 Share Posted November 7, 2015 My long term Warren view on IBM: Increases in earnings over the long term : Massive buybacks: IBM over the years: Year Earning per share($/sh) Shares numbers(millions) 1995 $1.81 2276 2005 $4.87 1627 2014 $11.97 1010 Marc Look at you, being all crazy by focusing on long term increasing earnings, dividends, and buybacks (which increased your stake of the company) instead of "5 year stock price underperformance compared to the S&P". Link to comment Share on other sites More sharing options...
Palantir Posted November 7, 2015 Share Posted November 7, 2015 Call us crazy, but we think that stocks that grow earnings while underperforming the market for short periods of time (yes, 5 years is short to us) can be incredible opportunities. That's interesting. Personally I prefer companies that are going to grow earnings in the next five years as opposed to the last five. Link to comment Share on other sites More sharing options...
Guest qanary Posted November 7, 2015 Share Posted November 7, 2015 That's interesting. Personally, I'm agnostic on whether a company grows or shrinks earnings and more focused on what I'm paying for said earnings. Call us crazy, but we think that stocks that grow earnings while underperforming the market for short periods of time (yes, 5 years is short to us) can be incredible opportunities. That's interesting. Personally I prefer companies that are going to grow earnings in the next five years as opposed to the last five. Link to comment Share on other sites More sharing options...
scorpioncapital Posted November 7, 2015 Share Posted November 7, 2015 Let's take a really bad scenario of revenues declining 10% per year for 10 years. Revenue at the end is only 30 billion or maybe 6 billion net. If it's still valued at 10x earnings or 60 billion and the share count was reduced by 1/2, which is still possible under this scenario, the stock price would be $123 (60b/485m shares) Today's price is $138. Now you will maybe receive $20-$30/share in dividends so let's say break even. That's a pretty solid downside but the opportunity cost is enormous. This is why people are worried about declining revenues. At 1 or 2% per year, the stock can still do well. Not at 10%. Reverse compounding. But consider what this means. IBM is dead under this scenario. One has to assume this is worse than a cigar butt, it would be a disaster. Anything in-between would be bad but still profitable. Flat or positive revenues and a thriving business will be a huge gain to investors at today's price. The problem is nobody really knows which of these it will be. If you think Buffett would have lost his marbles to invest in something that is similar to Berkshire textile mills or a shoe factory in America, then this really is a bad investment. Otherwise, it can't possibly turn out as bad as the currently pessimistic share price implies. It's priced for disaster. (Btw, the revenue drop assuming ex-divestitures with low profit margins) Link to comment Share on other sites More sharing options...
AzCactus Posted November 8, 2015 Share Posted November 8, 2015 Call us crazy, but we think that stocks that grow earnings while underperforming the market for short periods of time (yes, 5 years is short to us) can be incredible opportunities. That's interesting. Personally I prefer companies that are going to grow earnings in the next five years as opposed to the last five. +1 Link to comment Share on other sites More sharing options...
simplefocus Posted November 8, 2015 Share Posted November 8, 2015 Prem and Warren are both heavily invested in IBM, and Warren still keeps buying. They are the best of the best. Great price - $138 Growing dividends IBM services are very sticky - financial and governments. Switching is extremely risky for them. This is a no brainer for me. I bought IBM for the first time. Link to comment Share on other sites More sharing options...
Spekulatius Posted November 8, 2015 Share Posted November 8, 2015 Let's take a really bad scenario of revenues declining 10% per year for 10 years. Revenue at the end is only 30 billion or maybe 6 billion net. If it's still valued at 10x earnings or 60 billion and the share count was reduced by 1/2, which is still possible under this scenario, the stock price would be $123 (60b/485m shares) Today's price is $138. Now you will maybe receive $20-$30/share in dividends so let's say break even. That's a pretty solid downside but the opportunity cost is enormous. This is why people are worried about declining revenues. At 1 or 2% per year, the stock can still do well. Not at 10%. Reverse compounding. But consider what this means. IBM is dead under this scenario. One has to assume this is worse than a cigar butt, it would be a disaster. Anything in-between would be bad but still profitable. Flat or positive revenues and a thriving business will be a huge gain to investors at today's price. The problem is nobody really knows which of these it will be. If you think Buffett would have lost his marbles to invest in something that is similar to Berkshire textile mills or a shoe factory in America, then this really is a bad investment. Otherwise, it can't possibly turn out as bad as the currently pessimistic share price implies. It's priced for disaster. (Btw, the revenue drop assuming ex-divestitures with low profit margins) If business is so bad that the revenues shrink 10% annually, my bet would be that they would start to generate losses in a couple of years. It's really hard to shrink costs by 10% annually. Imagine would it must be like to work in such a company. There won't be any decent talent left after a couple of years, which will just accelerate the decline. You can't just do a simple excel model to get an idea what a future in such an scenario would look like, you need to think through the reality would it means to continuously downsize, to have a workplace without any perspective for the employees, which means that you can't really hire or even retain decent talent. You will be left with those that can't get a job anywhere else or that don't want to move or don't care. Even as it stands right now, IBM is already in such a situation more or less right now and I think it is part of their problem. Link to comment Share on other sites More sharing options...
scorpioncapital Posted November 8, 2015 Share Posted November 8, 2015 Even as it stands right now, IBM is already in such a situation more or less right now and I think it is part of their problem. Good point, dire is a disaster on all fronts. I don't think it will happen. But I did hear an interesting tidbit from Ginni at the Fortune Global Forum: She said 50% of IBM's employees are millennials. I couldn't believe me ears. If that is the case, that is not your grandfather's IBM anymore and has the potential to do well on the innovation front. Maybe sort of a young genius being mentored by the old guard. A new meets old culture. I've seen this work very well in other fields, even Buffett is a fan of this kind of dynamic. Link to comment Share on other sites More sharing options...
Guest Grey512 Posted November 8, 2015 Share Posted November 8, 2015 Prem and Warren are both heavily invested in IBM, and Warren still keeps buying. They are the best of the best. Great price - $138 Growing dividends IBM services are very sticky - financial and governments. Switching is extremely risky for them. This is a no brainer for me. I bought IBM for the first time. Please do not mention those two fellas in same sentence. Prem is one of the worst stock pickers ever! Without their insurance operations and ability to sell their overpriced stock to the bag holders, he would have been out of the business long time ago! BBRY, SD, RFP, XCO, etc etc... IBM might work over longer term, but that was not his original idea! not to mention staying fully hedged during one of the greatest bull markets. Finally! Thank you! I never really understood why Prem is regarded like a good stock picker. Link to comment Share on other sites More sharing options...
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now