International Business Machines Corp. (NYSE:IBM) is the forefather of tech stocks. At 107 years old this year, the thought of IBM stock as a major tech player sounds like a relic of a bygone era. Even on its own website, when you look for a corporate timeline, you’re linked to a page that celebrates its centennial — that was seven years ago.
Back in the days before the internet, technology progressed at a much more polite pace. It was reassuringly glacial. Big machines automated business practices that once took scores of humans to achieve.
It’s not too dissimilar to what we see now, as robotics, processing speed and artificial intelligence continue to replace the human element, albeit at a much more rapid pace.
A Slow Period for IBM
Big Blue was like a reassuring tech glacier. Always moving, but not at any pace that was causing any consternation. IBM built — and continues to build — incredibly amazing R&D projects in nanotechnology, artificial intelligence, the Internet of Things and cloud computing.
The problem, however, is that in recent years IBM hasn’t been able to effectively monetize its R&D investments. The company built the first personal computers, but licensed the technology rather than develop its own products. It built a great operating system but chose to buy DOS off Bill Gates instead.
The modern digital age has been tough for Big Blue. People still revere IBM, but more like a grandfather garners respect, rather than a peer.
In the past decade, IBM stock is up about 65%. Microsoft Corporation (NASDAQ:MSFT) is up 170% over that same time period.
In the past five years, IBM stock is off about 13%. MSFT is up about 230%.
Now, at this point, it may seem that this article is promoting MSFT rather than IBM. But that’s not the case.
Big Blue Has Big Promise
IBM still holds promise.
Big Blue missed the personal computer revolution. And it missed the mobile revolution. But IBM is on top of two big trends that may see this tech senior citizen get some of its groove back.
The first hot sector it’s making waves in is blockchain technology. This technology is fueling the buzz in cryptocurrencies like bitcoin. The blockchain allows people to see transactions taking place in real time but keeps the identities of the participants hidden. It allows peer-to-peer transactions that are extremely safe and reliable.
This technology can be applied to virtually any type of transaction. You set up the parameters and once agreed upon they can be coded and executed. This is the revolutionary aspect of cryptocurrencies and IBM is breaking blockchain out for more industries to use.
Second, there’s a lot of talk now that IBM may become a major cloud competitor. Right now, Amazon Web Services (AWS) and Microsoft Azure are the major players. But as cloud computing matures, the bet is many large customers won’t want to become beholden to one cloud provider. When this happens, IBM can be a reliable back up.
I’ll be looking for clues in IBM’s earnings report after the bell today. If either — or both — of these new sectors build IBM’s bottom line, you can be assured that the stock will start moving briskly.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
