David Farr, director at International Business Machines (IBM), recently bought 1,200 shares. The buy increased his stake by 17%, and came to total cost of $298,800.
This marks the first insider buy since last November, when another company director bought 936 shares at a cost of just over $197,000, representing an initial stake. Going further back, there were two small insider sales from SVPs in 2024. This constitutes all insider activity over the past two years.
Overall, IBM insiders own 0.4% of shares.
The technology hardware and services provider is up 30% over the past year, nearly double the return of the S&P 500 over the same time.
That’s in spite of a mere 1% increase in revenues, and an 11% drop in earnings growth. Plus, the company’s total debt soared a massive 213%.
Currently, IBM shares are in an uptrend, even with its weakening fundamentals. And the increased debt is going into further investments in AI and quantum computing, which could justify a higher valuation in the quarters ahead.
Action to take: Momentum investors may like shares here, given the current uptrend. But it’s not a growth play, and with shares at 39 times earnings, it’s not a value play either.
At current prices, IBM pays a 2.6% dividend.
For traders, as long as the current uptrend holds, a call option trade like the May $275 calls, last trading for about $6.05, could see mid-double-digit returns.
Disclosure: The author of this article has no position in the company mentioned here, but may further trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.