Hewlett-Packard Company (HPQ): Dow Jones Industrial Average (.DJI) Spotlight Stock of the Week

In 2013, Hewlett-Packard Company (NYSE:HPQ) has been the best-performing component of the Dow Jones Industrial Average (INDEXDJX:.DJI). Shares are up more than 54%, while the Dow Jones Industrial Average (INDEXDJX:.DJI) itself has risen by only 11.15%, and its second best-performing component, Travelers Companies Inc (NYSE:TRV) , has climbed by just 17.53% in comparison. But this past week gave us Hewlett-Packard Company (NYSE:HPQ)’s worst performance so far this year, with a 7.84% drop — its first decline since the week of Feb. 11.

Hewlett-Packard Company (NYSE:HPQ)

So what happened?
On Monday, one of the company’s top executives, Senior Vice President Ajei Gopal, announced that he’s leaving the company to join Silver Lake Partners — the private-equity group that’s attempting to take Dell Inc. (NASDAQ:DELL) private. Gopal will probably play a large role in helping Silver Lake turn Dell Inc. (NASDAQ:DELL) around, considering he’s helped in the same capacity at Hewlett-Packard Company (NYSE:HPQ). But Hewlett-Packard Company (NYSE:HPQ)’s turnaround is far from complete, so this isn’t a move Hewlett-Packard Company (NYSE:HPQ) shareholders wanted to see.

On Tuesday, Goldman Sachs Group, Inc. (NYSE:GS) analyst Bill Shope lowered Hewlett-Packard Company (NYSE:HPQ) stock from a “neutral” to a “sell,” saying he could see shares falling 31% from Monday’s closing price of $23.31. That means Shope believes that HP shares, which currently sit at $21.97, will drop to $16.09 sometime in the future.

Wednesday brought little news, but shares fell again, probably in reaction to the downgrade. Then Thursday arrived with more drama, as the company announced that Ray Lane will step down as chairman of the board but will retain a seat. Board members John Hammergren and G. Kennedy Thompson also announced that they’ve chosen to resign from their positions.

Shares closed the day up 1.78%, but they resumed their tumble on Friday, falling another 1.48% during the trading session. The seesawing performance of the stock following the announcements indicates to me that shareholders have mixed feelings on the board members’ moves.

During the most recent shareholder meeting, when board members were re-elected, Hammergren and Thompson received only 54% and 55% of the vote, respectively. Lane didn’t do much better at 58%. Typically, board members receive more than 90% of the vote, so it was clear that a large portion of shareholders weren’t happy with the job these members had been doing. Most analysts cite the $11 billion Autonomy purchase, and the subsequent $8 billion writedown, as the source of shareholder discontent.

What now?
The loss of an SVP during a turnaround is definitely a negative. He probably knows what H-P has planned for the future, and now that he’s going to work on behalf of a competitor, he could use that knowledge against HP in some fashion.

The downgrade is also a negative, but much less of one. It’s just one person’s opinion and should be viewed that way. In the short term, the downgrade has already affected the share price and may put further downward pressure on the stock in the coming weeks, but it will ultimately have only short-term effects. A downgrade in no way has any impact on the overall health of the business, and long-term-oriented investors need to remember that.

As for the board shakeup, it’s really a positive for all shareholders. Although investors themselves didn’t vote the men out, their voice was definitely heard, and it seems clear that the board may now be acting in shareholders’ best interests.

After reviewing the negatives and positives of the week, I believe they essentially balance themselves out. But that’s not to say the stock won’t still fluctuate dramatically over the next few days or weeks, or that I’d buy HP right now. The company still has a way to go to complete its turnaround, and I’d rather sit on the sidelines and let this one play itself out.

The article Dow Spotlight Stock of the Week: Hewlett-Packard originally appeared on Fool.com.

Fool contributor Matt Thalman has no position in any stocks mentioned. Check back Monday through Friday as Matt explains what caused the Dow’s winners and losers of the day, and every Saturday for a weekly recap. Follow Matt on Twitter: @mthalman5513. The Motley Fool recommends Goldman Sachs.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

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!