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Hewlett-Packard Company (HPQ), Nokia Corporation (ADR) (NOK): Should You Invest in These Turnaround Stocks?

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Investing in turnaround situations is a risky proposition.  While declining stock prices can seemingly present attractive opportunities, sometimes those declines are well-justified.  It takes a great deal of due diligence and patience to identify companies on the precipice of a successful turnaround.  The task is even harder in the realm of technology stocks.  These firms can go through extended periods of highs and lows due to the volatile swings of consumer favor toward a particular technology.  Within the technology sector, there are a few down-on-their luck stocks that might be great turnaround stories.  Or, they could simply be companies with dire prospects, whose declining underlying businesses warrant their collapsed stock prices.

Hewlett-Packard Company (NYSE:HPQ)On the subject of turnarounds, there is perhaps no better example than Hewlett-Packard Company (NYSE:HPQ). The company’s fall from grace has been well-publicized. After trading north of $50 in early 2010, HP began a nearly unimpeded decline down to its current level in the high-teens. The company reported a massive loss of $6.41 per share in 2012, due to higher operating expenses and a huge $18 billion impairment charge.

Their first-quarter 2013 results shouldn’t give investors any more of a reason to cheer.  The company operates in six segments, and five of them saw revenue declines versus the first quarter last year.  The only segment to see revenue growth was Financial Services.  To be clear, many of Hewlett-Packard Company (NYSE:HPQ)’s core businesses—namely Printers and Personal Systems—are in decline.

On a positive note, HP continues to be a strong cash flow generator, producing more than $6.8 billion in free cash flow in fiscal 2012. HP uses part of that cash flow to pay a dividend to shareholders, which it raised 10% in 2012 and now yields close to 3%.

Research In Motion Ltd (NASDAQ:BBRY) has a new name and a new phone to its credit.  Is that enough to right what is wrong with the company?  Shares have doubled since their low of $6 per share, reached last fall, but are still nowhere near the highs of more than $60 per share seen only a few years ago.  BlackBerry optimists can take solace in the fact that the company has a solid balance sheet with cash and equivalents that equal almost half the company’s market value.  Furthermore, the company now sells significantly below book value.
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