On November 15th, the business wire was full of news about Warren Buffet and his continued acquisition of IBM stock. Over the past nine months, Buffet has notched up his stake to roughly $11B. About 5%.
The market currently trades at a price to earnings ratio of around 12. IBM trades at a premium to that ratio at 14.6. With a dividend of 1.6%, IBM does not fit the popular trend of high dividend yielding stocks as it is well below the average of 2.9%.
What may be appealing is IBM's ability to:
IBM closed at $158.24 on 11.18.11, just .21% from its 52 week high. Analysts have a target price of $195.29 over the next 12 months. What similar companies does Warren Buffet hold? Caterpillar, Comcast, Coal India and CVS Caremark.
How would your shopping list measure up? With the help of Standard & Poor's, we uncovered the 5 point plan, see how your elections stack up. Of course, Sua Sponte!
� Free cash flow, or cash on hand after covering costs, of at least $250 million. Without strong free cash flow, a company would find it tough to expand its business, develop a new product, pay dividends, or reduce debt.
� Net profit margin of 15% or better. Net profit is net income divided by revenue, and can indicate whether a company has control of its costs.
� Return on equity, which is the amount of profit returned as a percentage of shareholder equity, or a firm's total assets minus liabilities, of at least 15% for the past three years and including the most recent quarter.
� A dollar's worth of earnings creating at least a dollar's worth of shareholder value over the past five years.
� Ample liquidity -- meaning only stocks with a market capitalization of $500 million or greater, though the American Association of Individual Investors believes that number should be greater than $1 billion.
Bradford C. Bruner for Sua Sponte Wealth Management
The market currently trades at a price to earnings ratio of around 12. IBM trades at a premium to that ratio at 14.6. With a dividend of 1.6%, IBM does not fit the popular trend of high dividend yielding stocks as it is well below the average of 2.9%.
What may be appealing is IBM's ability to:
- Increase earnings over 10% in the next twelve months. Providing both growth and value.
- Provide Cash Flow. Which guarantees the long term ability to fund those dividend payments.
- Exhibit strong leadership from its superior management team.
- Methodically allocate capital.
IBM closed at $158.24 on 11.18.11, just .21% from its 52 week high. Analysts have a target price of $195.29 over the next 12 months. What similar companies does Warren Buffet hold? Caterpillar, Comcast, Coal India and CVS Caremark.
How would your shopping list measure up? With the help of Standard & Poor's, we uncovered the 5 point plan, see how your elections stack up. Of course, Sua Sponte!
� Free cash flow, or cash on hand after covering costs, of at least $250 million. Without strong free cash flow, a company would find it tough to expand its business, develop a new product, pay dividends, or reduce debt.
� Net profit margin of 15% or better. Net profit is net income divided by revenue, and can indicate whether a company has control of its costs.
� Return on equity, which is the amount of profit returned as a percentage of shareholder equity, or a firm's total assets minus liabilities, of at least 15% for the past three years and including the most recent quarter.
� A dollar's worth of earnings creating at least a dollar's worth of shareholder value over the past five years.
� Ample liquidity -- meaning only stocks with a market capitalization of $500 million or greater, though the American Association of Individual Investors believes that number should be greater than $1 billion.
Bradford C. Bruner for Sua Sponte Wealth Management
