Thursday, August 8, 2013

Adding IBM

Been watching GE and IBM for the portfolio.  IBM is down over 10% from recent highs, has nice growth in EPS and dividends, and has reached a point of undervaluation.  I started a 1/4 position today at $187.65.  Here are few FAST Graphs:

Today's price of $188 is well below the earnings justified value (PE=15), and the historical valuation over the past 20 years.  Looking at the past 6 years:

Since the great recession of 2008/2009, the normal PE level is 13.8 vs. today's blended PE level of 11.9.  Looking at dividends and growth estimates:

IBM is growing dividends at 17% per year (CAGR), and analysts are projecting 10% growth in EPS over the next 5 years.

I trimmed some DOV and JNJ over the past week to pay for this acquisition;  both are large positions reaching overvaluation levels.



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