IBM has had a rough two years and the pain might not be over. While the rest of the market has soared in the last two years, IBM stock has done nothing but go down. Take a look:
You might think that IBM stock is worth a look at these levels, especially since it pays a 2.8% dividend and just signed on for the collaboration with Apple. Getting paid 2.8% to wait for things to turn around sounds appealing if you have the time.
But maybe the stock is in even more trouble and year three of the downturn might be a more realistic scenario than one where the stock rebounds. Other than the deal with Apple, what does the company really have going for it. By most accounts, not enough to make much of a difference and winning awards like these don’t help.
IBM is one of those huge tanker ships that takes a long time to turn around. Once the go to company for businesses, now it looks more like an aging dinosaur than the slimmer, quicker, and more nimble business tech infrastructure companies of today. Since her inception, new CEO Ginny Rometty has done too little to add innovation to the company and the stock has suffered. It seems they are late to the cloud which is killing them and buying back their stock does little to further the prospects of the company years from now.
Warren Buffett is IBM’s largest shareholder and while he has often said that long term investors should like sinking stock prices, one has to wonder whether he could at some time decide to let go of his shares. Should that happen, it would be devastating to the stock. If you think Buffett never sells any of his stocks and never makes a mistake think again as he did just that with his Tesco holdings.
So, while IBM may indeed make a turn around at some point, 2015 may not be the year. The two year decline to me indicates that something is really wrong here and is reason enough for me to stay away from this stock. At least until there is some concrete indication that things are changing for the better.