Tech stocks on the Dow Jones have seen mixed results this year, but one certainly stands out.
Of all the companies listed on the Dow Jones Industrial Average, International Business Machines (IBM) is set to be the worst performer in 2013. Its shares are down nearly 9.8%, compared to the 20.2% gain in the index to date. Trouble continued when IBM reported a very weak quarter, especially in the global business segments of its business.
While some of the other Dow Jones tech stocks haven’t exactly outperformed this year, none have seen a decline quite like IBM:
Click on the interactive chart to see returns for these tech stocks over time.
The mantra “never catch a falling knife” might be applicable here as IBM approaches a yearly low. The question that follows is what hints should investors look for that could suggest IBM’s prospects will improve?
IBM approaches yearly low:
Emerging markets, notably from China, were a weak spot for IBM. And the deceleration in revenue could continue in the current quarter. But execution was also partly to blame. Investors might need to see IBM make changes at the executive level before gaining confidence in the company.
IBM made substantial cuts in skilled labor in recent quarters. The cost cutting could have hurt quality of services, and customer losses could accelerate if IBM loses a claim made by Bridgestone. Bridgestone sued IBM for more than $600 million, blaming them for damages incurred from the failure of an IBM system implementation.
Value from share buyback declines
IBM set aside $5.6 billion to buy back shares, but raised the limit to an additional $15 billion. These purchases will now represent a paper loss on its balance sheet after IBM’s share price declined. It is useful to note that over the last 12 months, insider sales outnumbered purchases by a ratio of 3 to 2.
Hold or avoid IBM?
Bullish investors can be comforted by Warren Buffett Buying IBM. Yet it is unclear why Buffett held 68.1 million shares at the end of the second quarter. Imitating Buffett, or another other great investor, could pay off, but for everyone else, caution is still warranted. A deepening concern about the slowdown in IBM’s business suggests that investors be careful before buying shares of the company.
So should investors look to other tech stocks on the Dow instead? We sorted the six technology companies on the DJIA by performance in the year to date.
Do you think that IBM is a Dow Jones stock to avoid? Use the list below to begin your analysis.
1.Microsoft Corporation (MSFT, Earnings, Analysts, Financials):Develops, licenses, and supports a range of software products and services for various computing devices worldwide. Market cap at $313.3B, most recent closing price at $37.57.
MSFT Performance year to date: 40.84%
2.Intel Corporation (INTC, Earnings, Analysts, Financials):Engages in the design, manufacture, and sale of integrated circuits for computing and communications industries worldwide. Market cap at $118.9B, most recent closing price at $23.87.
INTC Performance year to date: 24.36%
VZ Performance year to date: 14.80%
4.Cisco Systems, Inc. (CSCO, Earnings, Analysts, Financials):Designs, manufactures, and sells Internet protocol (IP)-based networking and other products related to the communications and information technology industry worldwide. Market cap at $115.41B, most recent closing price at $21.46.
CSCO Performance year to date: 8.84%
5.AT&T, Inc. (T, Earnings, Analysts, Financials):Provides telecommunication services to consumers, businesses, and other service providers worldwide. Market cap at $188.26B, most recent closing price at $35.42.
T Performance year to date: 5.65%
6.International Business Machines Corp. (IBM, Earnings, Analysts, Financials):Provides information technology (IT) products and services worldwide. Market cap at $197.78B, most recent closing price at $181.30.
IBM Performance year to date: -6.46%
(List compiled by Chris Lau. All data sourced from Zacks Invesment Research.)
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Dig Deeper: Access Company Snapshots, Charts, Filings
- Microsoft Corporation(MSFT, Chart, Download SEC Filings)
- Intel Corporation(INTC, Chart, Download SEC Filings)
- Verizon Communications Inc.(VZ, Chart, Download SEC Filings)
- Cisco Systems, Inc.(CSCO, Chart, Download SEC Filings)
- AT&T, Inc.(T, Chart, Download SEC Filings)
- International Business Machines Corp.(IBM, Chart, Download SEC Filings)
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