Hewlett-Packard Co (HPQ)

The problem with this company is that it is a slow growth business. In the tech world there are companies that grow much faster. There are better opportunities out there where you are not paying a huge multiple for them.

It's now selling at exactly FMV. Its balance sheet can't support a stock buyback. In fact, they should be issuing stock. There's no upside. He doesn't like it now.

This is the personal printing system division. The revenue is growing as is their market share. It trades at a cheap valuation that he thinks should double over time. The monthly ink cartridge purchasing plan is brilliant, he thinks. Yield 2.4%. (Analysts’ price target is $25.60)

One of the knocks against this has been its desktop bias. Has a good dividend yield and is understood to be a single digit grower with a more reasonable PE. If you like a reasonable and growing dividend, then this is not a bad idea. However, it is going to be a long road and he thinks you can do better.

A technology company that has gone through its cycles of having done very well, and not doing very well at different times in the cycle. The chart shows it has done extremely well so far this year, but is getting really close to resistance. Look for it to break through $18.80. We are not in the technology cycle right now, so this is a good thing. If it breaks through around $18.80 that would be a positive sign.

The printing business has amazing cash flow. Margins on colour ink cartridges are massive. This is trading at a ridiculous multiple, probably 6 or 7 times earnings. There is no question that there will be some revenue decline for the next couple of years. Thinks there will be a lot of shareholder value created here.

Chart does not look strong. You have to validate as many factors as you can to raise the odds of success, and he does this by using technicals. This company gets tripped out of his process by the technicals. A great company, but not a great stock right now. This company is not really strong in the higher growth segment. 4.25% dividend yield.

(A Top Pick Nov 4/14. Down 31.52%.) When he bought this, it was a single company, but now it is 2 companies. The other one is Hewlett-Packard Enterprises (HPE-N). Hasn’t yet seen a quarterly report, but will get one in February. Doesn’t think the market is fully appreciating either one of these companies. This one is selling for about 7X earnings. He remains very, very bullish.

This is splitting up which could add some shareholder value, but when you look at the stock trend of late, it doesn’t seem like the market is really appealing to that plan. The long-term technical trends are negative. All of the moving averages are falling and the stock price is below the 200 day moving average. Doesn’t really like this from a technical standpoint.

Numbers just came out and they had weak PC results. The PC business is a very hard business. Did a very good job of cost-cutting when the stock fell to around $10. They continually have to do that. You are not going to see a lot of top line growth. Splitting into 2 separate businesses in November. The printer side is where you want to be. There are other tech companies that are much better off and in a much better space.

In 2010, 2011 and 2012, the stock was negative. After taking 3 years of a beating, the stock started to bounce back and has had a pretty good year. He is still not quite sure which way they want to go with the business. They have given direction that they want to transition from being a hardware business to software. Over 50% of their revenue still comes from the PC space, which is not a space he wants to be in, as he owns their competitor Apple (AAPL-Q).