Here is Why Bill Ackman Hates $HPQ

Bill Ackman was on Bloomberg Television and explained why he hates HPQ. Large shareholders of Hewlett Packard were literally begging Bill Ackman to take an activist stake and whip the company into shape Fortunately Bill Ackman noticed that he would suffer a significant amount of brain damage if he invested in HPQ. Here is what Bill Ackman said:

PERSHING SQUARE

“We have gotten over the last several months probably at least five or six calls from the largest shareholders of Hewlett-Packard begging us to take a stake in the company and be a proactive shareholder.  I think that what we focus on is that we try to find a business that we can predict what it’s going to look like over a very long period of time.  I have the fairly quaint notion that the value of anything is the present value of the cash you can take out of the business over its life.”

“The problem is that HP is in a number of businesses where I think it’s very difficult to predict what the business is going to look like five years from now, let alone over the many, many years of a discounted cash flow calculation you need to figure out what the business is worth.  The problem you’ve had is that it looks cheap, but the future of the PC industry is a very difficult business to handicap.  It’s incredibly competitive.  I think the announcement of their intention to spin part of the business off perhaps has damaged the brand and it is a big, complicated mess.  One of the things I learned a lot earlier in my career is to do a calculation which I call return on invested brain damage, which is before I make an investment which requires brain damage, or a lot of work and energy, I figure out how much money I can make.  The higher the brain damage, the higher the profit has to be to justify it.”

“I was actually at HP yesterday for a meeting unrelated to their core business and it was just depressing walking around.  The morale of the employees going from an outstanding company to one where they don’t understand the direction of the business.”

Do we agree with Bill Ackman? Not completely because HPQ is still a $50 billion company and it may be too big for Ackman to take an activist stake. However we agree with him about the risks in investing in HPQ. We don’t feel comfortable investing in HPQ because there wasn’t a single insider purchase since the stock went down to low 20s. One HPQ insider exercised his options at $24.61. If the stock was ridiculously cheap, he wouldn’t have done this.

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!