Check out this week’s stories about IBM’s largest software deal ever, Tesla’s profit quarter, and rocky stock markets. What does it all mean for investors? (3:00 min read)

This information does not take into account your personal objectives, financial situation or needs. You should consider if the relevant investment is appropriate having regard to your own objectives, financial situation and needs.


1. Red Hat gives IBM a one-way ticket to the cloud  

IBM has announced it plans to acquire Red Hat, an open-source software company, for a whopping ~US$34 billion.

It’s a game-changer for the cloud market, and also happens to be the largest software acquisition to date.

What does it mean if you’re invested in IBM?

The deal would provide IBM with faster revenue growth potential, and a larger presence in the coveted cloud industry dominated by Amazon and Google.

It’s an important milestone for a company looking to transition from its legacy businesses where revenues have declined over recent years. IBM’s global sales force should be able to sell more of Red Hat’s software products to clients.

The acquisition would also make IBM the world’s number one hybrid cloud provider.

What does it mean if you’re invested with AtlasTrend?

We see IBM’s acquisition of Red Hat as a significant development for the company.

IBM have been attempting to transform into a more modern, fast-growing businesses for years, and this acquisition allows them to do exactly that.

Red Hat makes IBM a more credible player in both private and hybrid cloud markets.


2. Tesla finally turns a profit

Much to everyone’s surprise (apart from maybe Elon Musk), Telsa reported a net profit of ~$312 million.

Proving the skeptics wrong came down to better than expected sales, and faster production of Tesla’s Model 3 car.

What does this mean if you’re invested in Tesla?

It’s been a wild ride for Tesla shareholders this year – particularly Musk’s recent erratic outbursts relating to taking Tesla private.

However, whatever Elon Musk was doing to improve production rates of the Model 3 seems to be working.

Things are certainly looking up this quarter, with the company finally turning a profit, as well outselling automotive leaders like Mercedes.

What does this mean if you’re invested with AtlasTrend?

Although Telsa could be a potential investment for the Clean Disruption Fund, we still have concerns about Tesla’s ability to consistently ramp up production and deliver profits.

Until it can show successive quarters of sales and production growth, we will likely remain on the sidelines.


3. Stock markets continue to fall

If you’ve been reading or watching the financial news, it can feel like the world’s stock markets are in meltdown mode – alarming headlines about the billions lost, whether there’s another financial crisis on the horizon, the list goes on.

Before you become as alarmed as those headlines, it’s crucial to understand whether:

  1. this is all just noise or;
  2. we are indeed in an unprecedented stock market fall.

What does this mean if you’re invested in the stock markets?

It has been a volatile month for the stock markets driven by worries over rising interest rates, a slow down in China, ongoing trade negotiations and uncertainties relating to the US mid-term elections. Let’s look at the US stock market, which is a good proxy for what’s going on in global financial markets.

At the time of writing, the US stock market has fallen approximately 8% during the month of October – not far off the 10% fall market commentators typically refer to as a stock market correction.

While it might feel like a unique occurrence, stock market corrections are actually quite common.

Since 2015, there has been 3 periods when the stock market dropped 10% or more as measured by the S&P 500 index. Following these declines, the market has still managed to reach new heights in the following years.

Smart investors will typically invest for the long term to ride out these corrections.

What does this mean if you’re invested with AtlasTrend?

At AtlasTrend, we stress the importance of having a long-term investing horizon.

We recognise the risks of short-term investing are substantial and inherently unpredictable, which is why we buy wisely and hold onto our portfolio positions with longer-term growth prospects.

Remember: a company like Amazon was founded 24 years before it’s trillion-dollar valuation.


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About Kent Kwan

Kent Kwan is a Co-Founder of AtlasTrend, an investment platform that makes it easy for anyone to learn and invest in trends impacting our world. Kent has over 17 years experience in financial markets including as Chief Investment Officer at Arowana International Limited, and roles at JP Morgan and Macquarie.