As financial media talk about big tech companies like Apple (NASDAQ: AAPL ) and
Google (NASDAQ: GOOG ) for growth, one name usually gets left out: IBM (NYSE:
IBM ). Why? Because it doesnt have pizzazz, its not sexy, its not hip. But so
what? IBM is positioned to benefit from some of technology's biggest trends,
such as cloud computing and mobile. And investors who dont necessarily care
about flash already are taking notice. This week, the stock of century-old IBM
hit an all-time high, reaching $186.63. And its market capitalization is now at
about $222 billion, making it the No. 2 most valuable tech company in the world.
During the past five years, IBM shares have generated an average annual return
of 18.55%. This compares to Microsoft 's (NASDAQ: MSFT ) 1.25% and Intel's
(NASDAQ: INTC ) 4.26%. Despite being 100 years old, IBM still looks like a
scrappy startup. So why all the success? Perhaps the most critical factor is
IBM's rock-solid management team. Essentially, it understands its strategic
goals but also realizes the importance of execution. A great example: In 2005,
IBM realized that the PC business was not the right place to be. As a result,
the company sold its once-mighty division to Lenovo. However, IBM's rivals
still are grappling with these types of decisions. Just look at Hewlett-Packard
(NYSE: HPQ ), whose stock price has been a disaster, yet it still is unclear
whether it will unload its PC business. IBM's management also has been quite
savvy with acquisitions. To this end, the companys dealmaking has been focused
on smaller transactions that provide lots of potential. Often, this means
looking at software technologies that can help companies with security, device
management and business intelligence. The strategy has been spot-on, and again,
IBM's rivals still can't seem to understand it, with many instead pursuing
blockbuster deals. This was the case with Microsoft's $8.5 billion purchase of
Skype and HP's $10 billion acquisition of Autonomy two transactions that
could prove difficult to wring value from. So in the meantime, IBM continues to
move forward and build its powerful platform. For the year, the company will
generate about $100 billion in annual revenues and more than $19 billion in
profits. But with its stock price at an all-time high, is IBM still an
attractive investment? For the most part, its price-to-earnings ratio is
reasonable, at about 15. IBM has a 1.6% dividend yield, and the company should
generate huge cash flows. And IBMs management team has proven capable of finding
ways to grow and evolve. So Big Blue still looks like Old Reliable. Tom Taulli
is the author of "All About Short Selling" and "All About Commodities."
You can also find him at Twitter account @ttaulli. He does not own a position in
any of the stocks named here.
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