|Wednesday, July 21, 2010
International Business Machine 2Q 2010 Earnings
This is a company we want to own for the long term and are buyers on weakness in price. Stock is down based on disappointing revenue number. Overall earnings slightly beat consensus. We expect the revenue number to be mixed over this sluggish period of economic growth. We are encouraged by the following positives:
1. Dividend has increased by 18%.
2. Europe and China did not slowdown.
3. Services were down in the 2Q but expect to ramp up in 3Q. International Business Machine 2Q 2010 Earnings
Wednesday, July 14, 2010
Intel’s 2nd Quarter
Intel’s (INTC) 2nd quarter came in at $.51, well above street estimate of $.43. Gross margins exceeded expectations at 67.2% versus 64%e. We are encouraged by management’s increase in guidance for the 3rd quarter despite the fact that inventories grew 12% quarter to quarter.
Company will benefit from the following areas:
1. Rebound in IT spending.
2. PC growth in emerging markets.
3. Increase in higher margin products.
In our opinion, this company continues to remain undervalued based on its ability to grow earnings and a superior balance sheet. Even if the stock traded at a market multiple for 2010, it would be worth $25.80 or a 22% increase from current price
Tuesday, July 13, 2010
2nd Quarter and Year to Date Performance
Since the beginning of the year we have been talking about having a bumpy stock market this year. Year to date, the S&P 500 is down 7.6% In the second quarter, we hit a pretty hard bump with the S&P 500 down 11.9%. The combination of health care reform, Greece (and the other PIIGS countries) and financial services reform sent people running from the stock market to the safety of treasuries. So much so, that the 10 year bond is now yielding 2.95% and the 2 year note is at .62%. Compare this to a 2.8% dividend yield on the Dow. We also had some hiccups in the weekly unemployment claims. It has always been our belief that the economic recovery would be driven by capital spending with a sluggish consumer. We still believe that to be true. Our philosophy of buying high quality large cap dividend paying stocks is even more appropriate in this environment. As long term investors we recognize that these stocks offer great value when compared to bonds and cash. The next few years we expect a slow growing economy and these stocks have the financial strength and flexibility to thrive in that environment.
CAIM LLC’s 2nd quarter performance was -9.66% versus -11.9% for the S&P 500. Year to date we are -4.16% versus -7.6% for the S&P 500. Our overall stock selection has been better than the market and we are continuing to hold a 6% average cash position.
Copyright 2010, CAIM LLC