Bearish on Big Blue

Featuring Thomas Thornton

Thomas Thornton, founder of Hedge Fund Telemetry, presents a bearish thesis on IBM. Thornton warns that “Big Blue” is a vulnerable stock in an overbought sector. He explains the technical and fundamental catalysts behind the trade in this interview with Justine Underhill. Filmed on July 12, 2018.

Published on
16 July, 2018
Trading, Micro, Technical Analysis
14 minutes
Asset class


  • TS

    Tyler S.

    18 7 2018 15:14

    0       0

    I would hold on this trade, its early, I have very good reasons to believe the next few earning sessions are going to be on point or strong.

  • NI

    Nate I.

    17 7 2018 16:21

    2       0

    IBM is a textbook example of the difference between a company run by agents versus one run by owners. So I agree with Tom in the sense that IBM's agents have run this company into the ground. They've borrowed so much money to finance nonsense like buybacks that the tangible book is now -$25. They've invested virtually nothing in building products or services that would delight their customers as evidenced by declining sales year-after-year. The agents should be criminally charged for fraud and eventually IBM is probably a $0, but as Marc Cohodes would say, I'm not sure it's wise to try to wrestle this jaguar out of its tree right now. That dividend plus the cost to borrow the shares will kill ya if IBM isn't down quickly. Maybe some long dated, out of the money, puts if they're cheap enough.

  • CM

    C M.

    17 7 2018 14:46

    5       0

    Jim Grant has written negatively on IBM in his newsletter. So Tom is in good company with this call.

  • SS

    Sam S.

    17 7 2018 13:19

    2       0

    Tom, I think you were very clear in your presentation and really appreciate your restatement below. However, standing by your convictions and statements, right or wrong, defines who you are and with strong character. All of us get it wrong in the insane world of finance, investing and trading. You covered the bases and the risk profile and that's the value I get out of RV TV with excellent guest speakers such as yourself. Stand tall keep, your chin up. Just the effort it takes to do this is an A+. Thx!

  • TT

    Thomas T.

    17 7 2018 12:30

    7       0

    For disclosure I am short IBM with a 5% sized position currently. I first started shorting IBM in 2012 and heard the same things from fundamental focused investors that it was very cheap, they were buying back tons of stock and Warren Buffett is a huge investor. All true! The stock was 200 and now it's 145. It's 4 years later and earnings have declined, margins declined, and competitors like AWS and Azure are taking share. Add in the fact they have bought back over $75 billion in stock with an average cost basis 20% higher and a lot of that buyback was funded by issuing low interest debt. I have spoken with several of the larger vanilla holders and they are getting impatient despite getting paid a dividend. I do believe there could be calls to replace the CEO soon too. My call is the stock could break down under 140, if earnings show no improvement (margins specifically) as long term holders give up. Last quarter which generally every tech company reported good numbers was weak despite they benefited by a weaker Dollar and taxes. Another scenario is that the tech sector is overbought and if there is weakness ahead the more oversold long term losing positions will be sold. IBM could be a candidate for vanilla mutual fund tax loss selling season too. I think the point of the Trade Ideas with RV is to show how someone frames a trade with risk reward and catalysts. This trade is more of a press the lows than when I first started shorting it in 2012. I even laid out the bullish scenario what they need to do for the stock to move higher to which this call would not work. That's my call and my stop is $160.

  • TH

    Timo H.

    17 7 2018 12:17

    1       0

    IBM's blockchain technology has already proven to be a huge failure. Vast majority of projects built on it have failed and the rest are struggling.

  • AB

    AJ B.

    16 7 2018 18:16

    1       13

    Good lord. Shorting a 12x PE with and over 4% dividend stock. This video actually made me bullish on IBM. At $115 the stock would yield almost 5.5%. The market will never let it get there. IBM has cashflow...this is not GE. This advice is worse that you get from CNBC. If this is an indication of where Real Vision is going I have a feeling I'm going to have to watch iShares advertisements before each video.

  • SS

    Sam S.

    16 7 2018 18:01

    11       0

    Tom Terrific! Speaks from the heart rather than scripted buzz. Lots of facts, technical's and fundamentals. Justine does great job as always. Thx!