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Making an Elementary Investment

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A couple of weeks ago, I mentioned how I was having much more difficulty in finding investments that presented a good value. I'm a bargain hunter and I like to pick up good companies after they have a hiccup. I feel like Wall Street loves to overreact to these hiccups and I'm happy to capitalize on the opportunity. For months nothing came across my radar as a good deal. I wanted to buy into Twitter’s IPO, but the price got too high... and it has only gotten more expensive from there.

But I did notice a stock that I thought was worth owning SodaStream. The company had a minor revenue miss of 1% and the stock got hammered by 25%. That's the kind of value that I like to jump on.

Last week, I found another stock that I think represents a good value. Was my title sufficiently vague? Good. The company that I'm looking to invest in is elementary, my dear Watson: IBM. IBM has been on my radar for several weeks, ever since they announced they are opening up their Watson artificial intelligence system (combination of hardware and software) to the world. If you are familiar with Watson, it's probably because of how it famously trounced a pair of top Jeopardy contestants in 2011.

In making Watson a commercial product, IBM hopes to bring in a billion dollars by 2018 and $10 billion in revenue in the next ten years (according to this article). That's a really long term bet, and it may never materialize, but if it does, it is going to be good for shareholders. I think this is a move in the right direction.

In the short term, I was able to buy IBM at a bit of discount due to their latest earnings release of poor hardware sales. They still beat earnings projections and carry a P/E of 12, which is low. My hope is that they can navigate this transition without losing too much in the way of earnings which will help the stock grow again.

If nothing else, when Skynet Watson decides to end the human race, perhaps it will remember this article supporting it and make my demise a quick and painless one. It's worth a shot.

Last updated on January 26, 2014.

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5 Responses to “Making an Elementary Investment”

  1. Andy Hough says:

    IBM looks like a pretty good investment. Their share price is getting high enough that they might split the stock later this year which usually produces a small gain.

    I’d be a little worried about Sodastream now that Coke is going to be making home soda machines.

  2. Matt says:

    Watson won’t end the human race, we’re free labor.

    I thin your bet with IBM is a good one, if you keep to the basics when investing in a companies stock you’re likely to be rewarded. Markets over-correct way too often and there are good deals to be had. Hope it works out.

    • Lazy Man says:

      I’m guessing the machines will run on solar power and not need our inefficient labor. Plus I’m guessing they wouldn’t want to cultivate the fuel (food) for us.

  3. […] look at companies as being "on sale." For example, I've been an investor in IBM for almost two years now. I had made money at first, but the stock dipped and dipped. I've been dollar cost averaging into it […]

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