American International Group Inc (AIG) & More: Two Biggest Positions of a Deep Value Mutual Fund

Bullish about Hewlett-Packard

Hewlett-Packard Company (NYSE:HPQ) is the second biggest position in GoodHaven Fund (MUTF:GOODX)’s portfolio, representing around 8.34% of its total holdings. Hewlett-Packard has declined substantially, from $29 per share in February 2012 to around $11 per share in November 2012. The significant decline in the company’s stock price was due to an overall decline in the PC industry and the huge $8.8 billion write-off of Autonomy, one of its biggest acquisitions. However, since the beginning of the year, the company has gained as much as 47%.

Trauner commented that the reason he invested in Hewlett-Packard was because its enterprise customers were quite sticky. He said: “When you have IT setups where changes affect thousands of devices, you don’t make changes quickly.” At around $22 per share, Hewlett-Packard is worth around $42.9 billion on the market. The market seems to value Hewlett-Packard Company (NYSE:HPQ) cheaply, at only 4.32 times EV/EBITDA. On Dec. 19, I wrote that investors could pick up Hewlett-Packard shares on the cheap, and consider the company as an opportunistic stock.

My Foolish take

I think that both Spectrum Brands and Hewlett-Packard are no longer attractive at their current price. Spectrum Brands Holdings, Inc. (NYSE:SPB) already has a rich valuation of a double-digit EV multiple. Hewlett-Packard is valued cheaply in terms of EV multiple. However, it still has as much as $35 billion in goodwill and intangible assets, which could be wiped out anytime. Thus, the risk is still there for Hewlett-Packard’s shareholders.

Anh HOANG has no position in any stocks mentioned. The Motley Fool recommends American International Group. The Motley Fool owns shares of American International Group and has the following options: Long Jan 2014 $25 Calls on American International Group.