Editor’s Note: I spent last weekend visiting my adult children. They are both software engineers, so I asked them to name some of their favorite tech stocks. I’m not surprised they did not mention today’s featured company, but it may be time for a new generation of investors to rediscover the business that is celebrating its 100^th anniversary under its current name.

No Respect

As last year was drawing to a close, I asked: “Over the next five years, will you be better off owning IBM or AAPL from a total return perspective?” At that time, International Business Machines (NYSE: IBM) was trading around $160 while Apple (NSDQ: AAPL) was bumping up against $200.

Some readers scoffed at the suggestion that IBM might find a way to outperform the most valuable publicly traded company in the world. Especially given how poorly IBM fared during the coronavirus pandemic, when many tech stocks soared in value.

When COVID-19 burst onto the scene in February 2020, IBM was trading above $150. Three years later, it was below $135. Over the same span, Apple’s share price nearly doubled.

But this year, it’s been a different story. Since the start of this year, AAPL has gained 17% through the end of last week. That’s a good return, but IBM’s 33 percent increase is much better.

Of course, Apple’s 315 percent total return (share price appreciation plus dividends paid) over the past five years dwarfed IBM’s 61% gain. For that reason, IBM still doesn’t get much respect on Wall Street. If IBM were a person, it would be the Rodney Dangerfield of stocks.

Experience Zones

Despite its recent success, 18 of the 25 Wall Street analysts that follow IBM have it rated as a ‘hold’ or a ‘sell.’ Only 7 of them are recommending it as a ‘buy.’

Those same analysts have an average one-year price target for IBM of $194. That is roughly 10 percent below where it opened this week near $214.

Talk about getting no respect!

Actually, that’s good news for IBM shareholders. If everyone on Wall Street thought IBM was a buy right now, then there would be nobody left to sell it to.

More good news arrived last week in the form of an announcement by IBM and Microsoft (NSDQ: MSFT). The two companies will open three new Experience Zones in New York, Romania, and the United Kingdom to better compete with Apple.

This development comes six months after the first Experience Zone opened in India. According to the press release, these facilities will “help global clients… find new ways to derive value from generative AI, hybrid cloud and other Microsoft products and technologies.”

Essentially, the partnership works like this: IBM consultants recommend Microsoft products to improve operating performance. They claim that “IBM consultants have successfully delivered thousands of Microsoft projects for clients.”

The Next Generation

Meanwhile, Apple is emphasizing its next generation of products. Three weeks ago, it introduced the Apple Watch Series 10. In addition to the usual upgrades in terms of speed and memory, this version of the watch “features new sleep apnea notifications.”

I realize sleep apnea is a serious medical condition. But from a growth perspective, its TAM (total addressable market) is considerably less than for AI users in India, Europe, the United States and the United Kingdom.

For that, Apple users can buy the new iPhone 16. It uses AI as a “personal intelligence system that helps you write, express yourself, and get things done effortlessly.” In other words, it is aimed at social media influencers to improve their content.

I’m sure those products will sell well. Apple has a huge base of loyal users that always snap up the latest gizmos from the company.

However, I’m pretty sure the TAM for that audience does not rival what IBM and Microsoft are working on. While Apple fiddles with its product line to goose sales, IBM and Microsoft are staking out unclaimed territory in the biggest growth market of this decade.

Read This Story: How to Beat Wall Street…Under All Investing Conditions

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