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Hardware - Monday, June 16, 2008

Tech:stocker - IBM Is My Dad's Favorite Stock Pick

So what if IBM (NYSE:IBM) is my dad's favorite stock pick right now. It's actually been his favorite pick for the last decade. Why should we care? Last year his portfolio increased by a whopping 22% and probably would have done better if hadn't listened to his financial advisor at Bank of America who talked him out of shorting more Google stock. To be fair to Bank of America, his advisor somehow survived the B of A and Fleet Boston merger as should have been one the first to go on the Fleet Boston side. But back to International Business Machines and why they should be a part of everyone's portfolio.

In the 70's, IBM battled Xerox in the copier arena, in the 80's it was Digital Equipment Corporation in the computer arena, and in the 90's the company seemed like they were competing with everyone who was offering servers and solutions for running a more efficient Web site. Not only has IBM adapted to the rapidly changing technology, they have been able to successfully position themselves as a leader of each of these new trends.

While the current economy doesn't favor a business like IBM on the surface, they should experience strong growth from their growing software division. While we at tech:stocker don't know anyone who still uses Lotus 1-2-3, the acquisition of Cognos and successful middleware platforms including Tivoli and WebSphere that give IBM an extremely competitive software offering that should keep their sales team motivated to conquer the longer sales cycles they will be facing over the next year.

But software is only part of the reason we think IBM will exceed $160 per share over the next 12 months. While watching the U.S. Open this weekend, we saw an ad focusing on helping businesses go green. Even if oil prices continue to rise, we think the importance of companies making significant progress to become environmentally friendly will position them for long-term success even if they haven't fully ideated their green plan.

My dad is still buying shares in IBM even though he still places his buy orders over the telephone. IBM will never help my dad adapt the new technology offered each decade but they will help him spend more money on his grand daughters while retired. This is a stock that should be in everyone's portfolio.