For the first time in not quite forever, the home computer market is contracting. In the third quarter of 2012, home computer shipments were down 8% from a year earlier, the sharpest decline since 2001. Most analysts also believe the home computer market was slower in 2012 than it was in 2011. Again, this has not happened since 2001. You may have read one or more of the 300 articles declaring the industry to be in a “tailspin.” It is odd that so many chose to use this exact word, especially since it is undeniably hyperbolic. The computer industry is certainly in a transitional period, and it may be that it never reaches its former heights, but the industry is far from dead, it may even have room for cleverly situated companies to grow. Though very different, these four companies all appear to be excellent buys at their current market price.
Hewlett Packard (HPQ)
Computer, printer and software giant Hewlett-Packard announced adjusted first-quarter 2013 earnings of $0.82 on Feb. 22, beating the consensus estimate of $0.71 by more than 15% and causing the stock to rise 14%, which is impressive. Then, over the weekend, Hewlett-Packard announced its second attempt to enter the all-important tablet market with its Slate 7. Hewlett-Packard has a problem in that it is all too often associated with bad news, including misguided acquisitions and a revolving door on the CEO’s office, but based on the consensus analyst estimate for 2013 earnings of $3.44 per share, the stock is dramatically oversold. Buy HPQ now, before the entire market begins to ask themselves why a company with annual sales in excess of $100 billion is trading at a price to earnings ratio of 5.3!
Chart courtesy of www.stockcharts.com.