Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



IBM's No Bellwether

One of my favorite bits of market wisdom comes from Peter Lynch's rambling, self-deprecating explanations of the inner workings of fund-dom.

He loves to point out that just about every year, he looked at his Magellan portfolio and wondered in disappointment why in the heck he held IBM (NYSE: IBM  ) . Of course, he answers the question elsewhere in his writings, when he explains that fund managers pick stocks like this precisely because they can't get into too much trouble when they screw up -- a much different situation than if, say, he'd stuffed the portfolio with something small and risky, like Rule Breakers pick Taser International (Nasdaq: TASR  ) .

To steal his explanation: If Taser tanks, it'll be, "Jayson! What's wrong with you?" If IBM tanks, it'll be "Jayson! What's wrong with IBM?"

Well, IBM screwed up, and today, I had to get my giggle on as a report in The New York Times confirmed that reality is indeed as silly as Lynch portrayed it. Remarks attributed to one Richard Petersen, an IBM analyst whose firm has an "outperform" rating on the stock, go even further, sticking the blame on the entire tech industry. The Times wrote this: "He noted that the breadth of IBM's struggles suggests the problem is not specific to the company. 'For them to miss by that amount suggests it's more than just IBM.'"

It's not my fault! Tech is bad! Reuters will be telling the same story today. In the U.K., The Times online made a similar, typical, bobbleheaded warning, backed up by IBM's failings, along with subpar results from Sun Microsystems (Nasdaq: SUNW  ) , Samsung, and the joint Sony (NYSE: SNE  ) and Ericsson (Nasdaq: ERICY  ) phone project, creatively named Sony-Ericsson, which saw a 4% revenue slide.

Get real, people. This is like evaluating a baseball team by judging the performance of four players on injured reserve. Sun has been stinking it up for a long, long time -- management's snotty attitude toward investors and analysts convinced me long ago that there was plenty of pain ahead. Ericsson? It put up some decent numbers last year, but at least one clever Fool foresaw the current malaise.

As for IBM, the writing was on the wall back in December, when I ventured to guess that a company that couldn't make money on its popular personal computers could probably find a lot more ways to mess up. Meanwhile, companies like Apple (Nasdaq: AAPL  ) get hammered, even though they put up very strong earnings. DittoDell (Nasdaq: DELL  ) , which has been doing just fine.

The moral of the story is this: There's no such thing as "tech" if you don't want there to be. There are winners and losers in every industry nook. Seek out the winners, and stick with those. And for crying out loud, when the winners get beaten down with the club meant for the losers, that's the time to go shopping, not run screaming with all the other lemmings. Keep your eyes open, because in the public loony-bin that is the markets, the freak-outs mean opportunity.

For related Foolishness:

Seth Jayson likes to keep a pile of cash on hand for times like these. At the time of publication, he had no position in any firm mentioned. View his stock holdings and Fool profile here. Fool rules are here.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 491550, ~/Articles/ArticleHandler.aspx, 10/22/2016 10:08:19 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 day ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:00 PM
AAPL $116.60 Down -0.46 -0.39%
Apple CAPS Rating: ****
DELL.DL $0.00 Down +0.00 +0.00%
Dell CAPS Rating: *
IBM $149.63 Down -1.89 -1.25%
IBM CAPS Rating: ****
SNE $32.11 Down -0.61 -1.86%
Sony CAPS Rating: ***
TASR $23.20 Up +0.09 +0.39%
Taser Internationa… CAPS Rating: ****