What Is Value?

I submit that value is not an obscure set of metrics. How many so called value stocks end up becoming value traps, because despite their metrics, they don’t provide an above rate of return compared to a safe treasury note or even against the market’s average return? I believe a true value stock is one that with a minimum level of value metrics is priced in a way where there is little in the way of downside risk and ends up providing an above average rate of return in a given period of time compared to both the risk free treasury and market averages. That is why I must implore you to look at IBM as a true value proposition at this period of time. The dividend yield of nearly 4.5% and the fact that the stock’s market capitalization is only 1.6 times revenue, places a floor under the stock that minimizes the downside. The stock isn’t revisiting it’s heyday growth years but it is about to generate reasonable growth in revenues that will result in above average stock market returns. That is my definition of value. Minimal downside risk, paying over 4% yield while waiting and capital appreciation above average over the next 3 month, 6 month and 12 month time frames. The catalyst comes tomorrow. Even if the earnings report isn’t a great positive surprise I believe that the forward guidance will be positive and build on the momentum achieved in the last few quarters. IBM is at a bargain price. BUY! Chartsmaster