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Guess Who’s Up 65% Year To Date? Hewlett-Packard Company (HPQ)

After falling from above $50 per share at the beginning of 2010 to under $13 per share late last year, Hewlett-Packard Company (NYSE:HPQ) has rallied to nearly $25 as markets have become less negative on the hardware, software, and services company. The second quarter of Hewlett-Packard’s fiscal year ended in April; during that quarter, revenue fell by 10% versus a year earlier and was down slightly on a q/q basis as well. While the company cut costs, net income was down compared to a year ago as well even if we add back its restructuring charges; the first half of the current fiscal year saw earnings per share of $1.18. However, many shrinking “dino tech” companies have managed to boast high cash flow numbers, and Hewlett-Packard is no exception with over $6 billion in cash flow from operations over the same period. Most of this CFO went to repay debt, buy back shares, and build up the cash balance.

Andreas Halvorsen

With cash flow numbers remaining strong, Hewlett-Packard Company (NYSE:HPQ) is valued at 4.4x trailing EBITDA. The stock also looks fairly cheap if we annualize its numbers so far this fiscal year- $3.36 in EPS would make for a price-to-earnings multiple of 7. Wall Street analysts expect results to be slightly better than that, with a bit more EPS growth in the following year. We certainly don’t like that business continues to  shrink, but certainly if HP could slow its decline than it would still be a value play at these levels even with its recent rally going by those cheap valuation metrics.

We track quarterly 13F filings from hundreds of hedge funds as part of our work researching investment strategies; we have found, for example, that the most popular small cap stocks among hedge funds generate an average excess return of 18 percentage points per year (learn more about our small cap strategy). According to our database, billionaire Andreas Halvorsen’s Viking Global initiated a position of over 10 million shares in Hewlett-Packard Company (NYSE:HPQ) during the first quarter of 2013 (see Halvorsen’s stock picks). Citadel Investment Group, managed by billionaire Ken Griffin, also increased the size of its stake (find Griffin’s favorite stocks).

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