The past year has been all right for the market as a whole, but EMC Corporation (NYSE:EMC) has lagged with the stock down 19% in the last 52 weeks. The $49 billion market cap data storage software and solutions company actually turned in decent financial performance in 2012, with revenue up 9% from the previous year and earnings increasing by 11%, but apparently these numbers disappointed investor expectations. In addition, we’d note that one of the largest increases in expenditures for the company was on R&D, which was increased by 19%; some analysts believe that R&D spending should be partially considered as an investment in the case of technology companies. EMC Corporation (NYSE:EMC) brought in $6.3 billion in cash flow from operations for the year, about half of which was used on capex and acquisitions.
EMC Corporation (NYSE:EMC) currently trades at 19 times trailing earnings, so the market is still expecting considerable earnings growth from the company- though we think that the 11% increase in net income from last year, if it could be sustained for several years, would at least be sufficient for EMC Corporation (NYSE:EMC) to be fairly valued at the current price. Analyst expectations are quite bullish: consensus for 2014 implies a forward P/E of 11. If the company achieved that target very little growth would be required after that point to make EMC Corporation (NYSE:EMC) a value stock, but we would not want to be too dependent on accurate projections from the Street.
We track quarterly 13F filings from hedge funds and other notable investors as part of our work developing investment strategies (for example, we have found that the most popular small cap stocks among hedge funds generate an average excess return of 18 percentage points per year), and can also use our database to see which funds owned EMC Corporation (NYSE:EMC) at the end of December. We can see that Brookside Capital, a hedge fund which is part of the Bain Capital alternative investments organization, reported ownership of 8.1 million shares (see Brookside’s stock picks). Tiger Cub Lee Ainslie’s Maverick Capital initiated a position of 6.4 million shares between October and December (find Ainslie’s favorite stocks).