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Tuesday, January 11, 2011

A few thoughts... AXP, IBM, AAPL and Dimon

With certain stocks we can get a good base from a future-trailing PE perspective, hence my 'forward PE' link.

AXP - AXP typically trades with a trailing PE of 14-15. Their last quarter closed, and are about to report soon. If the estimates are taken at face value, and incorporate the last 3 earnings, a trailing PE range will lead AXP to trade between $47-52. The stock is at 45 right now. The market is being inefficient, and (IMO) very incorrect. There is a leveling off of consumer credit, declining delinquency rates, better job market and very robust retail sales. Basically AXP should out perform on the earnings front. If they do not, the stock is still below where it should be. Looking to unload around 48.

IBM - The stranglers have about a week left, if not sooner. IBM usually rallies into earnings, then sells off even after good numbers. A similar future-trailing PE assessment as AXP is to be made for IBM. However, that is at a minimum. I am of the school of thought that IBM's businesses will begin to out perform, which will lead to a slight multiple expansion toward 16ish. We may need to see a solid growth quarter with increased guidance for that.

Looking to sell some IBM north of 150. Not selling below 150. (But I plan on always being exposed to it throughout this year for the multiple expansion thesis.)

AAPL - AAPL currently trades north of the future-trailing PE, and is technically overbought. Typically, this is when I get nervous. AAPL usually beats, by a lot, and this years guidance will accelerate faster then many think due to the Mac Store and Verizon iPhone. (Although I think the Verizon iPhone will eat away at iPod sales.) Within my 'forward PE' link I assume AAPL will beat consensus (5.31) by 19cents (to 5.50). Basically, AAPL deserves to be trading at the high-end. I did not have the courage to re-enter today. Thought about it when it was around 340, but discipline made me wait. If AAPL consolidates before it reports, I will enter. If not, I will wait until after earnings to start trading it again.

Dimon - If anyone wants a valid commentary on the current economic landscape watch this video of Jamie Dimon. He is one of the straightest shooters on Wall Street, and provides greater insight than any other blogger (except me ;), commentator or 'so called' economic gurus.

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