Whipsaw Wednesday – Our Stock of the Year (IBM) Leads the Recovery

Good morning! 

Our Stock of the Year off to a good start – especially as our 2-year target is only $140!  That was part of the reason we chose IBM, the spread was so compelling because IBM was collapsing on news they bought RHAT, which I thought was a clever idea and everyone else seemed to think meant IBM was going bankrupt or something.

Monday Market Madness – IBM’s $33Bn Shopping Spree Gives Tech Investors Hope

It's a powerful thing.  IBM (IBM) announced over the weekend that they will be buying Red Hat Softwars (RHT) for $33Bn which is more than 50% over Friday's $20 close at $116.  I noted in our chat room this morning that $33Bn may have seemed less ridiculous as IBM began negotiating with RHT, probably over the summer as RHT had just been at that valuation – though the people who valued them there were IDIOTS, of course.  

RHT has $3Bn in earnings and $250M in profit.  If it were an IBM division it would have been shut down years ago as not worth keeping but IBM sees RHT as leverage as their customers are the customers of Amazon (AMZN), Microsoft (MSFT) and pretty much all the other cloud providers and that gives the mighty IBM sales force a foot in the door to leverage the 10s of Billions of Dollars they spend on cloud services and THAT is why this deal makes sense for IBM. 

It's also a brave and confident move by IBM CEO Ginny Rometty and it's the kind of thing woman CEOs do that men almost certainly would not, which is make a move that carries a lot of personal risk for them, has no immediate payback but paves the way for the company to be much healthier in the distant future.  It's a nurturing move and the question now is whether she will be tarred and feathered for making it but predominantly male investors and


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