Rick Pendergraft's Avatar
Rick Pendergraft
published in Blogs
Oct 31, 2018
IBM Approaching Critical Support Level

IBM Approaching Critical Support Level

Over the last five weeks, International Business Machines (NYSE: IBM) has dropped 23% thanks to a disappointing earnings report and the announcement that it is buying cloud-software firm Red Hat (NYSE: RHT).

The sharp drop has the stock within reach of a critical support level. IBM fell from early 2013 through the beginning of 2016. When that bearish phase ended, the stock seemed to find support in the $110 area as the stock bounced around the level for three weeks before reversing upward.

Prior to the lows in 2016, you would have to go back to 2010 in order to see IBM trading below the $110 level.

At this point, value investors and dividend investors alike have to be looking at IBM. The yield for IBM has jumped to over 5% thanks to the price decline and the recently announced dividend of $1.57 per quarter.

Earnings for the last four quarters have totaled $14.09 and given the current price, the P/E ratio is at approximately 8.25. It isn’t very often you see an established company like IBM trading at a P/E ratio under 10 and offering a 5% yield.

In addition to the news about IBM buying Red Hat earlier this week, the company announced on Tuesday that the board has approved an additional $4 billion in its stock buyback plan. This should also be a point of attraction to value investors as the float is being lowered.

The two biggest concerns I have about IBM right now are the stagnant sales and earnings, and the possibility that the company is overpaying for Red Hat. Over the last three years, IBM’s earnings have declined by an average of 2% per year and sales have declined at a rate of 1% per year.

Red Hat should be able to help with the earnings and sales growth as it has averaged earnings growth of 23% per year over the last three years, while sales have increased at a rate of 19%.

My concern is the fact that IBM is buying Red Hat for $34 billion and that amounts to $190 a share. The deal was announced on Sunday, October 28 and the Red Hat’s stock closed at $116.68 on Friday, October 26. That is a premium of almost 63%.

Like I stated before, value investors and dividend investors should potentially give consideration IBM if they don’t own the stock already. A P/E ratio below 10 and a 5% yield are hard to come by. For growth investors, having Red Hat in the mix has to be appealing for the possible growth it can add to IBM’s top and bottom lines.

For me, I would consider buying at the current level with a drop below $105 as a stop. The other possibility is to wait and see if the stock drops to the $110 level and then try to pick it up there. If I did that, I would use a move below $100 as a stop.

Related Tickers: IBM
Sergey Savastiouk's Avatar
Sergey Savastiouk
published in Blogs
Mar 07, 2021
4 Tricks Hedge Funds Use to Get Ahead

4 Tricks Hedge Funds Use to Get Ahead

If the stock market were Major League Baseball, hedge funds and institutional investors would be the pros on championship teams while everyday self-directed investors (SDIs) are the benchwarmers in the minors.It’s how they get ahead, and it’s why 90% of SDIs lose money trying to play (invest and trade) in the major leagues. The 4 tricks we discuss below are rooted in one common theme: they all use Artificial Intelligence and algorithms to generate data and ideas.
John Jacques's Avatar
John Jacques
published in Blogs
Mar 22, 2018
A.I. Stock Market Predictions: Head & Shoulders

A.I. Stock Market Predictions: Head & Shoulders

Statistics for the Head-and-Shoulders Bottom Pattern The days where only hedge funds used algorithms to trade stocks are officially over. Now retail investors can use Artificial Intelligence (A.I.  Here’s an example of the algorithm in action: Late last year, Tickeron’s A.I.
Sergey Savastiouk's Avatar
Sergey Savastiouk
published in Blogs
Jul 10, 2020
3 Stocks to Buy if Coronavirus Second Wave Hits

3 Stocks to Buy if Coronavirus Second Wave Hits

By analyzing market trends from the first wave, you can predict behavior for the second. Technology stocks have performed at historic levels this year, but the market is severely overbought.To compensate for that, look at performance during Q1 and Q2, the height of global Covid shutdowns.
Edward Flores's Avatar
Edward Flores
published in Blogs
Feb 06, 2021
How to Become the Millionaire Next Door

How to Become the Millionaire Next Door

The Golden Gate Bridge is always a fixture of these walks too, one of man's most beautiful creations.  As we were walking, at one point she turned to me and said, "Man, I'll never have a million dollars."" My girlfriend is 27 years old and works as a graphic designer, making about $75,000 a year.
Alla Petriaieva's Avatar
Alla Petriaieva
published in Blogs
Feb 23, 2021
Is Ethereum’s Bomb about to Explode?

Is Ethereum’s Bomb about to Explode?

Ethereum’s software is set for an update in October.Until it is finished, participants in the Ethereum blockchain must determine how to delay the difficulty bomb – code that necessitates a steadily increasing amount of computer power to mine blocks and unlock rewards – that is already in place.
Sergey Savastiouk's Avatar
Sergey Savastiouk
published in Blogs
Aug 07, 2018
When Is the Next Recession Coming?

When Is the Next Recession Coming?

However, we also know that economists predicted 22 recessions out of 11 that took place since 1945. Are there real recession signs we should watch for?Indeed, the answer is yes, and here are a few very important ones: The first one is almost obvious and known to everyone – it is the Fed.
Abhoy Sarkar's Avatar
Abhoy Sarkar
published in Blogs
May 22, 2020
Central banks have been buying $2.4 billion in assets every hour for the past two months

Central banks have been buying $2.4 billion in assets every hour for the past two months

Some $17.8 billion has been poured into  bond markets over the past week, the biggest move in more than three months.Around $3.5 billion has been invested into gold, the second largest on record. 
Rick Pendergraft's Avatar
Rick Pendergraft
published in Blogs
Feb 07, 2021
Mid-January Short Interest Report Shows 8 Stocks with Good Fundamentals and High Short Interest
Sergey Savastiouk's Avatar
Sergey Savastiouk
published in Blogs
Mar 10, 2021
How to Start Trading Penny Stocks

How to Start Trading Penny Stocks

Penny stocks have long been marginalized within the professional investment community, oftentimes being painted with a broad brush of simply being “too risky.” Leonardo DiCaprio’s depiction of the penny stock peddling conman, Jordan Belfort, in the Wolf of Wall Street certainly didn’t help.Here are four reasons to start trading them now. Reason #1: Let’s State the Obvious -- Penny Stocks are Cheap A single share of Apple Inc. costs over $350.
Abhoy Sarkar's Avatar
Abhoy Sarkar
published in Blogs
May 08, 2020
US unemployment rate jumps to 14.7%, the highest in series history

US unemployment rate jumps to 14.7%, the highest in series history

The U.S. economy’s employment fell by -20.5 million in April. The coronavirus crisis led to unemployment rate soaring to 14.7% in the U.S, the highest rate in the Bureau of Labor Statistics-tracked series history that goes back to 1948. However, the figures were better compared to several economists'/analysts' forecasts of 22 million job losses and 16% unemployment rate.  Another unemployment measure that includes those who have stopped looking for work as well as those holding part-time jobs for economic reasons also touched an all-time high of 22.8%.