Sell IBM? Am I timing the market?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
fedbogle
Posts: 37
Joined: Sat Mar 18, 2017 12:30 am

Sell IBM? Am I timing the market?

Post by fedbogle »

Hi All,

Since I switched to a Bogleheads portfolio, I have been wanting to sell some IBM stock I've had for a while. I wanted to have capital losses to offset the gains. Now I should have enough (although they are short-term losses, but I don't think that matters).

But IBM has crashed recently. I'm convinced not to time the market with index funds, but is it any different for one stock? Any other reason not to sell IBM right now?

Thanks in advance,
Fedbogle
aristotelian
Posts: 8911
Joined: Wed Jan 11, 2017 8:05 pm

Re: Sell IBM? Am I timing the market?

Post by aristotelian »

You could have sold any time after Jan 1 to get the tax loss. Why didn't you? Nobody here has any inside info on IBM so I don't see what type of advice you are seeking. It may go up or it may go down. The current market price should be a fair approximation of its value.
Valuethinker
Posts: 42039
Joined: Fri May 11, 2007 11:07 am

Re: Sell IBM? Am I timing the market?

Post by Valuethinker »

fedbogle wrote: Sun Dec 23, 2018 7:44 am Hi All,

Since I switched to a Bogleheads portfolio, I have been wanting to sell some IBM stock I've had for a while. I wanted to have capital losses to offset the gains. Now I should have enough (although they are short-term losses, but I don't think that matters).

But IBM has crashed recently. I'm convinced not to time the market with index funds, but is it any different for one stock? Any other reason not to sell IBM right now?

Thanks in advance,
Fedbogle
The actual monetary asset you have in your hands is the capital loss, allowable for taxes.

Everything else is just either sunk cost (what you paid for it) or unsubstantiated (and unforecastable) assumptions about "recovery". Vaporware in effect.

IBM is strategically in a mess, and has a lot of problems. The stock has been highly financially engineered, borrowing money to finance share buybacks to create EPS growth. That's why Warren Buffett bought it, and it was a mistake*.

I am old enough to remember when the threat to IBM seemed existential (1992). Since then I have watched its recovery and its gradual fading towards irrelevance. Oracle faced the same fate, but made a series of giant acquisitions to lock in its enterprise software customer base (Peoplesoft etc.). There will always be mainframes so there will always be an IBM but it absolutely failed to seize either the first wave of the internet (perhaps they could have bought Netscape?) or the second (or third) of search, social media etc. AWS was invented at Amazon, the iphone at Apple, not at IBM etc.

I would sell the thing *now* and get that tax asset. Waiting for recovery? It may never come.

* arguably Buffett was blinded by his friendship with Bill Gates. Perhaps, if he had not known Gates personally so well, he might have realized that Microsoft was sitting on a gold mine which could be milked almost forever - the archetype of the "wide moat" created by the Windows + Office monopolies. The "strategy penalty" (the internal name for it) at Microsoft around Balmer's obsession with beating Apple and various internet ventures (none of which has been successful AFAIK - Bing anyone?**) was eventually eliminated by the new CEO and the company has continued to grow cash flow and earnings at a steady rate. Very Berkshire Hathaway.

** they nearly bought Yahoo for $45bn. Gives you an idea.
Topic Author
fedbogle
Posts: 37
Joined: Sat Mar 18, 2017 12:30 am

Re: Sell IBM? Am I timing the market?

Post by fedbogle »

Valuethinker wrote: Sun Dec 23, 2018 8:29 am
fedbogle wrote: Sun Dec 23, 2018 7:44 am Hi All,

Since I switched to a Bogleheads portfolio, I have been wanting to sell some IBM stock I've had for a while. I wanted to have capital losses to offset the gains. Now I should have enough (although they are short-term losses, but I don't think that matters).

But IBM has crashed recently. I'm convinced not to time the market with index funds, but is it any different for one stock? Any other reason not to sell IBM right now?

Thanks in advance,
Fedbogle
The actual monetary asset you have in your hands is the capital loss, allowable for taxes.

Everything else is just either sunk cost (what you paid for it) or unsubstantiated (and unforecastable) assumptions about "recovery". Vaporware in effect.

IBM is strategically in a mess, and has a lot of problems. The stock has been highly financially engineered, borrowing money to finance share buybacks to create EPS growth. That's why Warren Buffett bought it, and it was a mistake*.

I am old enough to remember when the threat to IBM seemed existential (1992). Since then I have watched its recovery and its gradual fading towards irrelevance. Oracle faced the same fate, but made a series of giant acquisitions to lock in its enterprise software customer base (Peoplesoft etc.). There will always be mainframes so there will always be an IBM but it absolutely failed to seize either the first wave of the internet (perhaps they could have bought Netscape?) or the second (or third) of search, social media etc. AWS was invented at Amazon, the iphone at Apple, not at IBM etc.

I would sell the thing *now* and get that tax asset. Waiting for recovery? It may never come.

* arguably Buffett was blinded by his friendship with Bill Gates. Perhaps, if he had not known Gates personally so well, he might have realized that Microsoft was sitting on a gold mine which could be milked almost forever - the archetype of the "wide moat" created by the Windows + Office monopolies. The "strategy penalty" (the internal name for it) at Microsoft around Balmer's obsession with beating Apple and various internet ventures (none of which has been successful AFAIK - Bing anyone?**) was eventually eliminated by the new CEO and the company has continued to grow cash flow and earnings at a steady rate. Very Berkshire Hathaway.

** they nearly bought Yahoo for $45bn. Gives you an idea.
Thanks for the thoughtful response.

Sorry though, my post was misleading. To clarify, I have a capital gain on IBM (I have had it since the early 2000s). Now from TLH, I have a loss to offset the gain.

I think I should trust the market valuation and get rid of it, just wanted to make sure I wasn't missing anything.
Topic Author
fedbogle
Posts: 37
Joined: Sat Mar 18, 2017 12:30 am

Re: Sell IBM? Am I timing the market?

Post by fedbogle »

aristotelian wrote: Sun Dec 23, 2018 7:54 am You could have sold any time after Jan 1 to get the tax loss. Why didn't you? Nobody here has any inside info on IBM so I don't see what type of advice you are seeking. It may go up or it may go down. The current market price should be a fair approximation of its value.
Thanks for the thoughtful response.

Sorry though, my post was misleading. To clarify, I have a capital gain on IBM (I have had it since the early 2000s). Now from TLH, I have a loss to offset the gain.

I think I should trust the market valuation and get rid of it, just wanted to make sure I wasn't missing anything.
3funder
Posts: 1560
Joined: Sun Oct 15, 2017 9:35 pm

Re: Sell IBM? Am I timing the market?

Post by 3funder »

My father used to work for IBM. He was a brand CFO, so he definitely has good insight. Gerstner bought the company 20 years, but Palmisano and his crew arrived more than fashionably late to the cloud computing party and engaged in buybacks to juice EPS metrics (I'm not sure why, as any analyst who knows how to do his/her job can see right through it). Ginny Rometty is trying her best, but the task before her remains a difficult one. Sell the stock if you'd like.
Global stocks, US bonds, and time.
JW-Retired
Posts: 7189
Joined: Sun Dec 16, 2007 12:25 pm

Re: Sell IBM? Am I timing the market?

Post by JW-Retired »

fedbogle wrote: Sun Dec 23, 2018 9:12 am Sorry though, my post was misleading. To clarify, I have a capital gain on IBM (I have had it since the early 2000s). Now from TLH, I have a loss to offset the gain.

I think I should trust the market valuation and get rid of it, just wanted to make sure I wasn't missing anything.
You usually don't need "a loss to offset the gain." If you don't have a loss it will offset your wage or other income (up to $3k/year). Often that offsets a higher tax rate.

If you have a loss already perhaps consider waiting until after January 1 to sell IBM?
JW
Retired at Last
aristotelian
Posts: 8911
Joined: Wed Jan 11, 2017 8:05 pm

Re: Sell IBM? Am I timing the market?

Post by aristotelian »

You could always sell gradually. I agree with above, if you have losses currently you could deduct that this year and then begin selling IBM in Jan 2019.
User avatar
bertilak
Posts: 8144
Joined: Tue Aug 02, 2011 5:23 pm
Location: East of the Pecos, West of the Mississippi

Re: Sell IBM? Am I timing the market?

Post by bertilak »

I would not call it marked timing. You (presumably) bought IBM because you liked the company's prospects. If you no longer like those prospects, sell. That's stock picking -- all part of active investing. It is reasonable to take into account tax consequences.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet
drk
Posts: 2078
Joined: Mon Jul 24, 2017 10:33 pm
Location: Puget Sound

Re: Sell IBM? Am I timing the market?

Post by drk »

fedbogle wrote: Sun Dec 23, 2018 9:12 am Sorry though, my post was misleading. To clarify, I have a capital gain on IBM (I have had it since the early 2000s). Now from TLH, I have a loss to offset the gain.

I think I should trust the market valuation and get rid of it, just wanted to make sure I wasn't missing anything.
I would sell it and consider myself lucky. You've done better than most GE investors out there!

For what it's worth, looking at its higher valuations and wanting to wait for it to get back there in order to sell is an example of anchoring.
bb
Posts: 325
Joined: Wed Apr 25, 2007 10:04 pm

Re: Sell IBM? Am I timing the market?

Post by bb »

I wouldn't walk to the exits - I would run.

Generally one train of thought is if you didn't own it already would you be a buyer today - if the answer is no then sell.

Watson seems like a bust. They don't seem to be a leader in the cloud business. It is not clear to me even if IBM was a leader in emerging businesses if they wouldn't have lower margins than their historical businesses.
User avatar
beyou
Posts: 3605
Joined: Sat Feb 27, 2010 3:57 pm
Location: Northeastern US

Re: Sell IBM? Am I timing the market?

Post by beyou »

I have 30+ years of experience in IT. Early in my career I remember cocky IBM salesmen coming by regularly to see my boss at a major bank. Then one day we moved to #2, DEC. Years later I tried to hire their consulting division to help with integration of IBM mf with Sun unix tech. They had no clue and could not help at all.

I see them as a has been in the industry, and for a very long time. I dont see why anyone would be a buy/hold investor in IBM. Unfortunately my index funds gives me exposure, but I am not going back to stock picking again.
Post Reply