How Do We Feel About Hewlett Packard?

[jpluncford21]

I scanned over an article on MSN Money saying Hewlett Packard is a good "end of the year" buy. I don't put much weight in articles like this, but it did make me a little curious. I did a little poking around for a few minutes, and it looks like HP is at an 18 year low. The company has also been steadily increasing it's dividends throughout it's history. Obviously there is more to look at and consider, but  I was just curious if anyone else is looking into HP at the moment.

http://investing.money.msn.com/investments/financial-statements?symbol=HPQ

[arebelspy]

HP is, and has been for about 12 years, run by a bunch of idiots.  Until their board shows me they can hire someone competent for management, I wouldn't touch them with a 10-foot pole.

The early-retirement.org forums has an HP thread if you're interested.  IIRC I last posted in it around a year ago, with the same opinion.

[jpluncford21]

HP is, and has been for about 12 years, run by a bunch of idiots.  Until their board shows me they can hire someone competent for management, I wouldn't touch them with a 10-foot pole.

The early-retirement.org forums has an HP thread if you're interested.  IIRC I last posted in it around a year ago, with the same opinion.

I will definitely check out that thread. I see HP going lower in the future, and I don't see their situation getting any better any time soon. An 18 year low is definitely tempting though.

[DoubleDown]

An 18 year low is definitely tempting though.

Personally I would not give that factor any consideration whatsoever. The 18-year low could be a prelude to a 50-year low. Ask Kodak or Xerox or any other company that never, ever rebounded. The past means absolutely nothing, all that matters is where it will go from here.

[Khao]

HP? Please stay away from this. How many times did they change CEO in the last 2-3 years? On top of my head I think I remember at least 4 different CEO in the last couple years. They are incapable of running a business and they make terrible products. I would never invest in them.

[arebelspy]

An 18 year low is definitely tempting though.

Personally I would not give that factor any consideration whatsoever. The 18-year low could be a prelude to a 50-year low. Ask Kodak or Xerox or any other company that never, ever rebounded. The past means absolutely nothing, all that matters is where it will go from here.

This.

Stating something like "18 year low" just screams the phrase "value trap" to me.

http://www.investopedia.com/terms/v/valuetrap.asp

[Another Reader]

HP was a great business until they decided to spin off their original instrument business as Agilent and focus on the commodity computer business.  It's been downhill ever since and I think old Bill and Dave are spinning in their graves over the divestiture.

[Paul der Krake]

Pretty much what arebelspy said. They have been trying (their words, not mine) to move from the hardware business to the software business. Problem is, they suck at it. Fostering a developer culture at a huge company of any kind is no small feat, so yeah, good luck with that.

The onion, as usual, nails them.

[smedleyb]

Value trap.  But it may very well  bounce here, given that:  (a) it's near  multi-decade support ($11-12); (b) it's down 80% in less than 2 years; and (c) beaten up stocks sometimes bounce early in new year after funds "dump" said company shares at end of prior year so nobody laughs at them for owning HPQ when they release their end of year holdings.

[arebelspy]

Here is the thread on e-r.org I was talking about: http://www.early-retirement.org/forums/f44/hewlett-packard-57610.html

The poster that started it had reasons to buy (same reasons OP is giving here, thinking because it's low it has value).  He stated:

This has got to be the most hated stock I have ever seen. Everything I watch and everything I read about it is negative to the max! 

The forward P/E is 4.6 now!

I'm up to 280 shares and plan to buy more as soon as I get paid for the month. Look at the numbers and forget the stupidity of the higher ups. This company is so oversold its hilarious.

..just because it has dropped doesn't mean it's a good time to buy.

He noted in Sept 2011:

All told I bought 300 shares at a cost of $7,384.60. So an average cost of $24.62 per share. I'm up about $1,000 so far. I think it is possible I could end up about doubling my money within the next five years and I'll make 2% per year in dividends while I wait.

Then did a little dance emoticon.  He was quite happy.  It's now sitting at $14.21, so if he stopped buying there (but hadn't got out yet), he'd be looking at a loss of ~3.1K (of his 7.3K invested).  Ouch.

Not only has he not got out though, as of May of this year, he was doubling down.  Then even later in the thread (Oct 2012) he notes he has ~1k shares at a cost basis avg $21. 

That brings his losses to ~7k (of 21k).  Wonder if he'll ride it all the way down to bankruptcy, buying in more and lowering his cost basis, insisting he's right, all along the way.

I say all this not to make fun of that poster at all.  Indeed, there but by the grace of Jack Bogle go I.

I bring it up as a perfect illustration (indeed, it's literally the exact same stock).  Don't let yourself become that guy, OP (or anyone else reading this).  Trying to time some individual stock because you think it's at a low is a road to disaster.  Even if it works once, it just won't consistently.  Be thankful posters like the one in the other thread are there to learn from, and then actually learn from them.

[smedleyb]

I bring it up as a perfect illustration (indeed, it's literally the exact same stock).  Don't let yourself become that guy, OP (or anyone else reading this).  Trying to time some individual stock because you think it's at a low is a road to disaster.  Even if it works once, it just won't consistently.  Be thankful posters like the one in the other thread are there to learn from, and then actually learn from them.

In all fairness Arebelspy, a competent and seasoned speculator (market timer) would never sit through a 40% decline.  I read his posts.  They scream novice. 

[arebelspy]

That depends on if the market timer still thinks it's a good buy, rather than a short term play.

And his posts are focusing on him buying (and then losing money).  Unless you No True Scotsman a "competent and seasoned" market timer as unable to lose money, I don't know what makes him any necessarily novice.

In any case, does the OP (of this thread) feel confident he's much more capable than the OP of that thread?  And, if so, why is he asking here?

In general, I think that guy is a good example as a proxy for the vast majority of potential market timers, the rare exception aside.

[fiveoh]

HP is dead money.  If you want to buy into a beaten up PC stock look at intel.   Just my .02 which isnt worth much. 

[smedleyb]

HP is dead money.  If you want to buy into a beaten up PC stock look at intel.   Just my .02 which isnt worth much.

The biggest headwind facing Intel:

http://www.technologyreview.com/news/507011/the-pressures-on-for-intel/

Transform or die.  It's precisely why Microsoft will certainly be the next HPQ if its Surface tablet and phone fail to take market share away from Apple.

[fiveoh]

HP is dead money.  If you want to buy into a beaten up PC stock look at intel.   Just my .02 which isnt worth much.

The biggest headwind facing Intel:

http://www.technologyreview.com/news/507011/the-pressures-on-for-intel/

Transform or die.  It's precisely why Microsoft will certainly be the next HPQ if its Surface tablet and phone fail to take market share away from Apple.

Intel is facing headwinds with the transition to mobile which is why the stock is cheap.  However they are still dominating the pc market(everyone is saying pc is dead.... it definately isnt growing like it was but I think its far from dead) and their server division is doing great.  They have big plans for getting into mobile... they are late to the game and it remains to be seen if they will be able to push into mobile or not.  They have an awesome balance sheet and pay over a 4% dividend and buy back lots of shares.  It's a way better gamble than HP right now imo. 

[smedleyb]

Intel is facing headwinds with the transition to mobile which is why the stock is cheap.  However they are still dominating the pc market(everyone is saying pc is dead.... it definately isnt growing like it was but I think its far from dead) and their server division is doing great.  They have big plans for getting into mobile... they are late to the game and it remains to be seen if they will be able to push into mobile or not.  They have an awesome balance sheet and pay over a 4% dividend and buy back lots of shares.  It's a way better gamble than HP right now imo.

I agree with your thesis -- if you gotta buy an old tech stalwart, Intel is the best house in a crumbling neighborhood. 

Just laying out the primary obstacle to sustained Intel price appreciation.  Also, stock buybacks suck.  The most inefficient use of company funds, IMO.   

[tooqk4u22]

Intel and Microsoft are far better choices.  You can debate HP's strategies and products all day long, but like arebelspy said the company is and has been mismanaged and until that changes I would stay away....to be honest I am surprised it is still alive given how poorly it has been run.

Rgarding intel and microsoft though, these are not growth stocks and never will be again...they are mature and is why they pay nice dividends.  They have been in the same small trading range for over a decade....simply the law of large numbers even if they create the next latest best thing all that will mean is they will produce enough revenue to replace the revenue from whatever the next latest best thing is replacing.  Although I think there is more downside potential in intel.   

[smedleyb]

Again, we've listed the litany of reasons which propelled HPQ into the low teens.  Obviously much of the negativity and what has "gone wrong" is already priced in the stock.  What's not priced in is what can "go right."  And though it has bounced 30% since announcing it's massive write off on the Autonomy acquisition, there's the good chance it can continue to move higher based on the overwhelming bearishness surrounding the stock, as well as due to the "January effect," where beaten down stocks that get sold at the tail end of the year get re-bought in the new year.  Hope springs eternal. 

[arebelspy]

Again, we've listed the litany of reasons which propelled HPQ into the low teens.  Obviously much of the negativity and what has "gone wrong" is already priced in the stock.  What's not priced in is what can "go right."  And though it has bounced 30% since announcing it's massive write off on the Autonomy acquisition, there's the good chance it can continue to move higher based on the overwhelming bearishness surrounding the stock, as well as due to the "January effect," where beaten down stocks that get sold at the tail end of the year get re-bought in the new year.  Hope springs eternal.

What makes you think some things are priced in, but others aren't?

[smedleyb]

What makes you think some things are priced in, but others aren't?

A freshly polished crystal ball? :)

That, and I read the following on a message board:

-HP is, and has been for about 12 years, run by a bunch of idiots.  Until their board shows me they can hire someone competent for management, I wouldn't touch them with a 10-foot pole.

- I see HP going lower in the future, and I don't see their situation getting any better any time soon

-Personally I would not give that factor any consideration whatsoever. The 18-year low could be a prelude to a 50-year low. Ask Kodak or Xerox or any other company that never, ever rebounded.

-HP? Please stay away from this.

-"18 year low" just screams the phrase "value trap" to me.

-HP was a great business until they decided to spin off their original instrument business as Agilent and focus on the commodity computer business.  It's been downhill ever since

-They have been trying (their words, not mine) to move from the hardware business to the software business. Problem is, they suck at it.

-Value trap.

-HP is dead money.

Holy shit that's negative, even if it's anecdotal.   Add to that a stock which is off 66% since Feb 2012 in a virtual straight line, the potential for a reactive move the other way is quite high.

Now, do I suggest that you sell the farm and bet the ranch on Whitman righting the ship?  Hell to the no, mofo. But a bounce may be in order given that we all know HPQ sucks, it's core business is dying, their management blows, they're the next Xerox, etc, etc.  Which all may be true over a long enough time-line, even if I believe that perhaps right around here ($12-14) HPQ tries to make a heroic stand as it attempts to bounce back to the high teens.   As long as it stays above $11 the stock appears to be putting in a bottom -- temporarily, of course.  And mind you, I have zero desire to speculate one way or the other.  But if you put a gun to my head and said "buy or sell," I would definitely be a better buyer, especially down a buck or two from these levels.

 

[DenverStache]

So here is the real question.  What do you do if you already own HPQ?  Sell now and cut losses?  I have had these shares for > 5 years and got lazy.  Should have sold them a long time ago.  I did just sell a bunch of stock for profit this year so maybe it would be a good way to offset my gains.  Thoughts?

[arebelspy]

So here is the real question.  What do you do if you already own HPQ?  Sell now and cut losses?  I have had these shares for > 5 years and got lazy.  Should have sold them a long time ago.  I did just sell a bunch of stock for profit this year so maybe it would be a good way to offset my gains.  Thoughts?

Loss harvesting before year's end sounds like a good idea.

[TomTX]

Individual stock purchases are typically a bad choice for the individual investor. The risk/reward profile just isn't there.

Stick to low-cost index funds.

[chucklesmcgee]

A freshly polished crystal ball? :)

That, and I read the following on a message board...

Holy shit that's negative, even if it's anecdotal.   Add to that a stock which is off 66% since Feb 2012 in a virtual straight line, the potential for a reactive move the other way is quite high.

I wasn't quite sure if you were serious or just trolling. You're actually serious, I think. This is great stuff!

...do I suggest that you sell the farm and bet the ranch on Whitman righting the ship?  Hell to the no, mofo...
But a bounce may be in order...
...HPQ sucks, it's core business is dying...
Which all may be true over a long enough time-line...
even if ...
I believe that...
perhaps ...
right around here ($12-14)...
HPQ ...attempts to bounce back to the high teens...   
As long as it stays above $11 the stock appears to be putting in a bottom...
temporarily, of course... 
...I would definitely be a better buyer, especially down a buck or two from these levels.

Congratulations! You've ambivalated on a stock's future price sufficiently and vaguely enough such that almost no matter what happens it still looks like you're right! You're well on your way to becoming an "expert" stock picker!

[smedleyb]

Congratulations! You've ambivalated on a stock's future price sufficiently and vaguely enough such that almost no matter what happens it still looks like you're right! You're well on your way to becoming an "expert" stock picker!

Hey!  I have no idea what you're talking about!

[smedleyb]

Again, we've listed the litany of reasons which propelled HPQ into the low teens.  Obviously much of the negativity and what has "gone wrong" is already priced in the stock.  What's not priced in is what can "go right."  And though it has bounced 30% since announcing it's massive write off on the Autonomy acquisition, there's the good chance it can continue to move higher based on the overwhelming bearishness surrounding the stock, as well as due to the "January effect," where beaten down stocks that get sold at the tail end of the year get re-bought in the new year.  Hope springs eternal.

HPQ popping 10% to start the new year on no news.  January effect in full effect. 

Just thought I'd mention it lest others think I'm trolling.

[Ishmael]

Intel and Microsoft are far better choices.

HP is currently a garbage company. They suck at software, like no one else. No wonder they can't break into that. Their hardware is spotty. I like their printers, but nothing else.

Intel is gamble I think. The world is moving away from desktops and laptops to tablets and smart phones (and soon to be other form factors), and Intel isn't strong there. They have brilliant people, but sometimes its very difficult for a big company to change direction quickly enough.

Microsoft isn't going anywhere with Ballmer at the helm. He doesn't have the vision. And, like Intel, the world is moving away from what has been their bread and butter. Did you know that if you include tablets and smart phones, Microsoft is now around a 20% market share for the computing market? They have the resources to stick around for a long time, but I don't see any long term growth until Ballmer is gone.

Google is positioning themselves really nicely long term. Not sure about valuation though. RIM might be worth a gamble, but it's really a huge gamble.

IBM is a great company; Warren Buffet bought in not too long ago.

Apple was awesome, but Jobs' vision was so huge I'd be nervous. They'll probably keep going up for a while at least though. I wish I had put $10k in when I started to believe in them way back... it was $23.75 a share then, and split once so that would be worth something like $463k now. *sigh*

Oracle is probably solid. They've always been good at monetizing their position.

Facebook is icky, but are in such a strategic position..

[smedleyb]

Dell rumored to be going  private.  Maybe, but probably not.  If anyone has any intention of selling HPQ, I would be doing it right here, right now above $17.