The last year has been really bad for the PC industry. A number of companies have lost their fortunes due to the slowdown in PC sales and the rise of handheld devices. One of the most affected companies has been . The company has suffered from not only a decline in PC sales due to growth of smartphones and tablets, but also from falling printer sales due to the same two adversaries. Meanwhile has suffered from the falling sales of its LCD segment, but has successfully diversified into specialty materials. I am bullish on both Hewlett-Packard Company (NYSE:HPQ) and Corning Incorporated (NYSE:GLW), but institutional investors think otherwise.
This makes insider trades an interesting method of guessing long term strategy and short term catalysts for any company. There is of course the risk that insiders could be buying the stock only to increase investor confidence or selling simply due to portfolio requirements, and not due to company-specific information. Contrary to my perspective, these two stocks have been actively traded by institutional investors in the last 6 months.
HP is the world’s leading manufacturer of printers and PCs. The company has been facing tough times, primarily due to reduced demand in both its PC and printer segments. The main culprit in this regard has been the rise in handheld devices, such as smartphones and tablets. This rise has affected HP by shifting computing from PC to handheld, and at the same time reducing the utility of printed paper. You can read my detailed analysis of HPhere.
The falling demand in its major segments has not been the only problem for HP. The company was correctly trying to look for new avenues of growth by making strategic acquisitions. However, the execution has been below average and the stock has paid the price. The story of the Autonomy fiasco is still half told, and it remains to be seen how this mess concludes.
In the last six months institutional investors have sold more than 88 million shares of HP, reducing institutional ownership by 6.29%. While this is bad news for investors, the stock is still trading at a P/E of 4.35x, which is way below the industry P/E of 18x. The company also offers an amazing dividend yield of 4.5%, which is approximately 80% above the industry average.
Corning is one the world’s largest manufacturers of specialty materials. It is involved in the manufacture and sale of specialty glass and ceramics products. The Display Technologies segment is Corning’s largest segment and contributes approximately 35% to revenues. The company has been focusing on diversifying its revenues through new products such as Gorilla Glass and Gorilla Glass 2.
