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IBM Could Be a Better Bet on a Pullback


Don't overlook the lift-off the stock has already experienced.

So guess what I found under a couch cushion in my living room last night? The remnants of a piece of cake from my oldest daughter's sleepover birthday party this last Saturday. I don't know much about interior decorating, but I'm pretty sure chocolate cake doesn't go with a white sofa. Serenity now!

Asian stocks closed lower overnight. The Hang Seng and the Nikkei were off 1.81% and 0.25%, respectively. European stocks were lower early this morning, too. And here in the US, we're currently trading lower.

Here's what I'm seeing on this fine hump day:

International Business Machines (IBM):
Big Blue was out with its fourth-quarter numbers last night after the bell. It managed to put up $3.59 a share, which was way north of the $3.47 a share the Street had been expecting.

To boot, it indicated that it's looking to put at least $11 on the scoreboard in 2010, which would be darn impressive.

Some thoughts:

These results were awesome and I have a hunch that the actual bottom-line number in 2010 could be well north of $11.

Take a gander at the release, and check out the gross margin improvement. That alone says a heck of a lot about how great this company really is.

3. Betting against Big Blue would be like betting against mom and America. It's been a consistent performer and has been whooping estimates.

4. All that said, it's hard to overlook the lift-off the stock has already experienced. It makes me wonder if it's time for a breather. My hunch is that things would better compute on a pullback.

For my previous take on IBM, click here.

Citigroup (C):
Citi was out with its fourth-quarter numbers yesterday. It lost $0.33 a share. Yeah! (Note sarcasm.)

Some thoughts:

I find it difficult to get excited about the release. And if I were Vikram Pandit, I'd probably bookmark and keep some cardboard boxes and rolls of tape handy just in case I was handed my walking papers.

Even though the shares got a little bit of a boost in yesterday's session, I won't be bellying up any time soon. Under $5 a share -- and given the meager profits that are expected in 2010 -- I have little enthusiasm for the story.

For my last take, see Will a Citigroup Offering Be Enough?

Archer Daniels Midland
Justin Sharon points out in his article this morning that Citi goosed its rating to a Buy.

My two cents:

1. Trading at just 10.9 times this year's estimate, I think the Illinois-based company needs a lot more loving from the Street than it's getting right now.

2. My hunch is that it's got a reasonable chance of breaking out and hitting a new high within the next few months, given the earnings potential there.

Don't forget the dividend, either. It's a little cherry on top of this sundae.

Big Lots
JPMorgan took the company down to Neutral.

On the one hand, it doesn't look all that bad at 13.7 times this year's estimate. But on the other hand, I'd much rather play in the Target (TGT) sandbox. I just see more upside potential there. Justin Sharon points out the downgrade in his article, and I agree -- I think the shares could take it on the chin in today's session.

Have a great day!
No positions in stocks mentioned.

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