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I’m not convinced IBM is well managed, this investor says

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Investors are rekindling interest in IBM (IBM Stock Quote, Chart NYSE:IBM) again, after the company posted its first year of revenue growth in a number of years, but Scotia Wealth director Mike Newton says that if you’re really looking for a boring-but-stable investment option, he’s got a few bank stocks for you to look at.

In comparison to other large-cap tech companies like Apple and Amazon, IBM’s performance over the past few years has been nothing to write home about, and 2018 was no exception, with the stock dropping 26 per cent for the year.

Yet the stock received a nice boost in mid-January when the company reported its fourth quarter earnings, featuring consensus beats on both revenue and profit. Management’s guidance for 2019 also impressed, calling for earnings of $13.90 per cent in comparison to the forecasted $13.79.

“In 2018 we returned to full-year revenue growth, reflecting growing demand for our services and leadership solutions in hybrid cloud, AI, analytics and security,” said Ginni Rometty, IBM chairman, president and CEO, in a press release. “Major clients worldwide, such as BNP Paribas, are turning to the IBM Cloud and our unmatched industry expertise to transform their businesses and drive innovation.”

What’s more, IBM announced a number of deals over the quarter, including the acquisition of software company RedHat and a new chip manufacturing deal with Samsung.

But Newton isn’t buying it.

“It’s a Dow component, it’s a value name and it’s coming back into vogue a little bit,” says Newton, portfolio manager and director of wealth management at Scotia Wealth, to BNN Bloomberg on Tuesday. “The problem I have is that there’s so much excitement just underneath the IBM world.”

“I’m not really convinced that they’re well-managed, to be honest. There’s something missing in the ethos of that company,” he says. “You don’t hear about IBM going out and buying —I’ll just pick names out— whether it’s Workday or ServiceNow, any of these on fire mid to small-cap enterprise software companies that are changing the world.”

“So, I’m not as bullish on IBM when I can give you 20 names that I think are more exciting. And if I was going to own a boring name, I wouldn’t own IBM, I’d own a Verizon or a bank stock,” he says.

Currently, IBM’s share price is up 21.2 per cent for 2019.

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About The Author /

Jayson is a writer, researcher and educator with a PhD in political philosophy from the University of Ottawa. His interests range from bioethics and innovations in the health sciences to governance, social justice and the history of ideas.

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