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Even monster-sized firms can have untapped upside

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Putting an old-school industrial name like GE on the same list as an ultra-nouveau digital holding like Google (NASDAQ:GOOG) might catch some investors off guard. But, both behemoths belong here … just for different reasons.

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In retrospect, it’s kind of funny. In every year since, say 2006 or so, more than a handful of prognosticators have asked themselves — and answered publicly — whether Google has peaked, meaning it has run out of ways to grow revenue and income. In every year since then, Google has cranked up the bottom line, from 2007’s $4.2 billion to last year’s $9.7 billion.

The doubters continue to dominate, considering the stock’s recent (non)action; Google shares still are struggling with a technical ceiling at $632. Nothing has been able to stop earnings growth yet, though, and there’s not much likely to do so in the future as Android-powered machines continue to proliferate and the company continues to widen its web through Google Wallet, Google+, Google TV, and serving as an ISP (in some locations). There are no growth barriers.

International Business Machines

Last but certainly not least, International Business Machines (NYSE:IBM) — aka IBM or “Big Blue” — is one of those names with a stock that can gyrate, but an income-growth streak that won’t.

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Try this on for size: The last time IBM didn’t grow its quarterly income on a year-over-year basis was in Q4 of 2004. You read that right. That’s 30 quarters of reliable YOY profit growth. Uncanny. Yet, given the recurring revenue nature of its service business, there’s not much that’s apt to disrupt that growth streak in the future.

Ergo, the way to play IBM is by buying it on the dips, kind of like the 11% pullback we saw between April and July. At 14.2 times its trailing income, it’s not like there’s a valuation problem here.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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