Is EMC Corporation (EMC) A Good Stock to Buy?

Page 1 of 2

Data storage, infrastructure, and security company EMC Corporation (NYSE:EMC) has been left out of the stock market’s rise year to date, with its current stock price at about the same levels as the beginning of 2013 while the S&P 500 has risen about 15%. This is in part due to higher costs in the first quarter of 2013, which caused pretax income to be essentially flat versus a year earlier after adding back restructuring and acquisition related items, even as the company’s revenue grew by 6%. EMC Corporation (NYSE:EMC) generated $1.7 billion in cash flow from operations during the quarter; the primary use of this case was to repurchase both its own shares and those of its subsidiary VMware, Inc. (NYSE:VMW) (a portion of VMware’s stock trades separately in the market).

Wall Street analysts expect EMC Corporation (NYSE:EMC) to earn $1.86 for 2013, which would imply a current-year P/E multiple of 13. We saw in the company’s most recent 10-Q that business did not appear particularly strong, but if EMC continues to buy back shares with its cash that would reduce share count. We’d still prefer if the company were growing its earnings rather than just using repurchases to grow EPS, however. The sell-side doesn’t seem to be expecting much of an increase in net income, with their forecasts only showing small improvements in earnings per share. As a result, we wouldn’t consider EMC Corporation (NYSE:EMC) a value stock right now just because of the stagnant performance- if further results convinced us that profits themselves might rise, then any reduction in share count could leverage that earnings growth nicely.

MAVERICK CAPITAL

We track quarterly 13F filings from hundreds of hedge funds and other notable investors, and have discovered that the information in these filings can be used to help develop investment strategies (for example, the most popular small cap stocks among hedge funds generate an average excess return of 18 percentage points per year). According to our database, Tiger Cub Lee Ainslie’s Maverick Capital owned close to 11 million shares of EMC Corporation (NYSE:EMC) as of the end of March (find Ainslie’s favorite stocks). Renaissance Technologies, whose founder Jim Simons is now a billionaire, initiated a position of 7.9 million shares (check out Renaissance’s stock picks).

VMware has been growing its revenues at a slightly higher rate than EMC, going by its own quarterly report, though again even after addbacks we see little change in pretax income. Markets are valuing the stock at a premium to its parent; for example, the current-year P/E here is 22. With business conditions not seeming much different at VMware, we’d avoid it. We’d also note that 12% of the float is held short- market players may be pair trading EMC against VMware.

Page 1 of 2
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

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

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!