When we “crowd-sourced” the idea among other investment professionals and individuals that like to do their own investing, HP(Hewlett Packard) was a fools gold kind of stock. One that had all the pieces in place but given it’s industry in commoditized printers/computers as well as its late start into the smart-phone market, it doesn’t have much upside. I beg to disagree.
What I see in HP, is a company that’s still beating Wall Street estimates even after it keeps acquisitions on the up and up. Better than that, the companies that they’ve been acquiring have yet to positively attribute anything to their bottom line (most notably Palm, all they are doing so far is sucking up R&D, administrative, and production dollars). And they’ve still not come out with an webOS based product in the year of 2010. Buying companies that currently increase expenses and not revenue, yet still beating estimates are a testament to their management’s efficiency, and their price’s undervalued potential.
On the upside...and I mean UPSIDE...HP announced that they will debuting tablets, cellular devices, and printers installed with webOS in 2010. Along with their regular numbers (which already place it as one of the largest tech companies in the world), these added features and capabilities to their product line will allow it to stand head and shoulders above others in their competitive industry.
Looking at the R&D numbers from their last three quarterly earnings reports, you can see that they are investing heavily in the development of new products. This increase most likely deals with the Palm acquisition last year. R&D will undoubtedly help them gear up for the new webOS releases and foray into the smartphone market.
All in all we see HP taking a small piece out of the pie that is the smartphone market. We see it’s continued dominance in the printer market. Also, we see it making quite a bit of headway in the tablet market once it releases one running webOS. As for earnings and the fundamentals, HP has a steadily rising EPS over the last four quarters, as well as a treasure chest-esque amount of cash on the balance sheet. Even if they fell into trouble with a flop in the smartphone arena, they still have the cash to effectively counter the effects on their future operations. At revenues of $33 billion, we don’t see that happening anytime soon. We have a price target of $70 on HP by October of 2011.
Monday, November 29, 2010
Thursday, November 11, 2010
Message to the Veteran's
Hats off to everyone who has served in the armed forces. There is no possible formation of words in the English language that could tell you how much we appreciate your sacrifices to serve our country. No matter where you've served, or in what capacity you've served, we are eternally grateful.
Friday, November 5, 2010
An Undervalued Aspect in Investing
The most undervalued aspect of investing is the area that remains shrouded in gray. Most believe that investing (and personal finance in general) is black and white. Either you invest in risky equities, or you invest in safe, bond-like securities. Either you spend as much as you make; or you hold on to every nickel and dime that you come in contact with. But what about the gray area? Or the area that you purposely shade in gray?
The gray area in investing would be asset allocation; for personal finance, the zeroed-out budgeting system. The so called “sweet spot” in either is usually identified by a financial planner (or someone of that kind of profession), or by an individual who is self-educated on what works best for their age and lifestyle mix.
In our opinion the most undervalued aspect of investing is due diligence. We harp on it time and time again, because with due diligence we have found Amazon, Apple, and Netflix to have unbelievable high returns over the last 2-2.5 years. Through due diligence you’ll see that HP(Hewlett Packard) is poised to set the investing world on fire with it’s future earnings. Take into account it’s 2010 acquisitions and you will see the breadth of its product line is about to get more intuitive than ever before. More on that later.
Due diligence is what makes the world go around. And lucky for investors of the technology age, it’s easier now than ever to come across proprietary information. Sure the larger institution have their super-computer algorithms. But, people tend to have a way of adapting and adjusting in a way that an algorithm may not due to it’s mechanical nature. Always remember that when considering due diligence; management shifts, acquisitions, and financial statements can exploit some gray areas that computers themselves cannot take into account.
The gray area in investing would be asset allocation; for personal finance, the zeroed-out budgeting system. The so called “sweet spot” in either is usually identified by a financial planner (or someone of that kind of profession), or by an individual who is self-educated on what works best for their age and lifestyle mix.
In our opinion the most undervalued aspect of investing is due diligence. We harp on it time and time again, because with due diligence we have found Amazon, Apple, and Netflix to have unbelievable high returns over the last 2-2.5 years. Through due diligence you’ll see that HP(Hewlett Packard) is poised to set the investing world on fire with it’s future earnings. Take into account it’s 2010 acquisitions and you will see the breadth of its product line is about to get more intuitive than ever before. More on that later.
Due diligence is what makes the world go around. And lucky for investors of the technology age, it’s easier now than ever to come across proprietary information. Sure the larger institution have their super-computer algorithms. But, people tend to have a way of adapting and adjusting in a way that an algorithm may not due to it’s mechanical nature. Always remember that when considering due diligence; management shifts, acquisitions, and financial statements can exploit some gray areas that computers themselves cannot take into account.
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