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Friday, April 29, 2011

Google Docs is down... and IBM

Oh the dangers of the Cloud.  I was trying to access my Google docs files, particularly the 'forward PE' file, to make some adjustments to the IBM multiple, but low and behold, it is down. Luckily for me, the rough numbers are etched in my brain already.

Here is where I am going with this post...

Basically, at 172, IBM is now trading with a trailing PE of 14.5. However, and more fascinating to me, is that the computers (evidence being Yahoo Finance trailing PE) are not properly reflecting this. Which tells me the big boys and quants are willing to see the multiple expand past 14.5.  This suggests to me the market has now accepted IBM to have a larger multiple, and I think the 14.5 will be the low end. Historically, for a company like IBM and IBM itself, around 16 is the high end.

Before today, and as IBM approached 170, I sold off my entire IBM position while day trading this up move.  With the above thesis in play, I lightly re-entered via the 170 Oct calls.  I plan on holding these calls until a true trailing multiple of 16 is seen.  I will add aggressively on pullbacks, especially anything below 170.

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