Summary
Buy IBM when no one will.
Warren Buffett overpaid for IBM, but current shareholders are not.
IBM changes its strategy through M&A.
IBM is undervalued, even if visibility is poor.
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Investment Thesis
IBM (IBM) understandably continues to frustrate shareholders. But I argue that we should use the frustration of other investors to our advantage. IBM is trying to pull every lever it can to remain relevant in a highly competitive space. Nevertheless, when all is said and done, IBM remains highly free cash flow generative and dirt cheap.
Recent Developments
I have always asserted that IBM's shareholders should not be invested in IBM for its dividend. That to a dividend investor, one should be invested in other sorts of businesses.
IBM is a tech stock, so it's under the mercy of rapidly changing technology to drive its core operations. Next, being a dividend investor in IBM builds the wrong sort of temperament from investors.
Those dividend seekers, chasing a 5% dividend only to see the stock sell off more than 10% in a short period of time, will leave shareholders feeling frustrated and disenchanted and inclined to sell out of IBM.
On the other hand, investors that are apathetic towards its dividend, while at the same time believing they own a portion of IBM's future profitability, will develop the correct temperament. And importantly, the patience necessary to withstand large sell-offs in its share price.
