Trades on 2020-07-23

Sold remaining ECNS position

ECNS one of the lowest-yielding positions in my retirement account. Additionally, it's an ETF which I don't like. Additionally, the dividends of its earning are subject to foreign taxes. I've been trying to liquidate all of my ETF positions and replace them with holdings in individual stocks, but I have found fewer high yield stocks to be particularly bullish about in recent years than growth stocks, so I still hold some ETFs in my IRA. Since I decided that right now is a good time to take a position in a particular high yield stock that has been on my watch list, I liquidated my ECNS position today.

Bought IBM

I should have put a lot of money into MSFT when its horrendous failure of a CEO was replaced by someone competent in 2014. I knew that this had happened in 2014 because Satya Nadella was already spearheading Microsoft's adoption of Linux and open source technologies, and someone has to be good to get away with doing this at Microsoft. I was excited that someone with his track record became Microsoft's CEO because it marked the end of an era of Microsoft as the bastion of evil in tech. I like to think of Microsoft's rally in the six years since then as the stock market dancing on Steve Ballmer's grave. I know he's not technically dead yet, but that doesn't mean we can't all dance on his grave.

Since Ballmer's retirement, Ginni Rometty has been, in my opinion, the leading candidate for the title of "worst CEO of a major tech company." She started pivoting the business more towards businessy consultanty kinds of things and away from technology. She oversaw at least 24 consecutive quarters of revenue decline. She led the company towards increasingly BSy domains like security and more or less missed the boat on cloud computing. During her tenure as CEO, IBM increasingly developed a reputation as an outdated behemoth, at least as far as its ability to recruit talent was concerned. IBM is not topping most people's list of places where they would want to work these days.

Arvind Krishna comes from the most technical side of IBM, leading its machine learning, quantum computing, and cloud computing business. Rometty . She oversaw a huge acquisition for IBM shortly before she became its CEO. It was for some consulting division of some major accounting firm. Which one? Who cares? All a consulting company is is its reputation. Arvind Krishna also oversaw a major acquisition right before becoming CEO. It was for RedHat. I was upset about this at the time. I thought one of the best company's in the world was being eaten by an ancient behemoth. I wasn't sure what operating system I would use in the future. CentOS and Fedora have been my preferred operating systems since about 2015. I didn't want to see IBM destroy them. With someone who appreciates them at the helm, I'm no longer that worried they will.

The Ballmer is to Rometty as Nadella is to Krishna analogy is so obvious its hardly worth saying. However, I think its likely that Krishna will be an even better CEO than Nadella has been. Arvind Krishna is by all appearances actually a genius. Everyone with a Ph.D. in Electrical Engineering could easily have gotten an MBA. The converse is not true. Krishna has more than mere business achievements. He actually has made scientific contributions to his fields. Not many scientists have actually led multi-billion dollar enterprises, at least in the United States. Sergey Brin and Jim Simons spring to mind. Sadly few engineers lead large companies. Michael Bloomberg, Gwynne Shotwell, Mark Zuckerberg, and Elon Musk spring to mind. (I know Musk's degree is technically in physics, but he is definitely an engineer more than a scientist.) Businesses run by scientists and engineers tend to do well. I should probably look to see if I can quantify this belief in any reasonably straightforward way, but I'm reasonably confident that companies with engineering-track CEOs have radically outperformed companies with business-track CEOs (e.g. lawyers and MBAs), and I would expect this to continue to be true in the future. The ability to solve problems is a much more valuable leadership skill than the ability to merely manage problems.

I'd been thinking about investing in IBM since the Rometty stepped down and appointed Krishna as her successor as CEO (while also promoting the former CEO of Red Hat to be IBM's president -- a role that is apparently distinct from CEO), but I expected its stock price to keep declining until the market started to see the company differently, and was waiting for some indication that it had bottomed out. That may already have happened. If anything, the lockdown seems to have accelerated IBM's transition back to being primarily a tech company with its emphasis on its technological solutions which is the direction it was pretty clear IBM would head with the changing of the guard. IBM significantly beat on both earnings and revenue this quarter, and it heavily emphasized the growth it is seeing in its cloud services in its reporting. I think it's quite possible that IBM has bottomed, in which case, now is the write time to be enter an investment in it.

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