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Debating Past Performance

By Jim Pearce on September 21, 2015

Like many of you (and 22 million other people, according to CNN), I watched last week’s Republican presidential candidate debate. Even at nearly three hours in length it didn’t leave much enough for any of the eleven participants to delve into substantive dialogue, but I was intrigued by an exchange between Donald Trump and Carly Fiorina regarding the impact on Hewlett Packard during her term as its CEO.
trump fiorinaWhile attacking one another’s merits as captains of industry Trump alleged that Fiorina’s leadership at HP “led to the destruction of the company”, while she claimed that she was managing the company during a difficult period (1999-2005) that forced her to lay off 30,000 workers to keep the company afloat after its merger with Compaq. To Fiorina’s credit, HP’s revenue doubled as a result of the mergers she helped engineer, but higher costs resulted in no net increase to income.

Regardless of what the truth really is, it’s been ten years since Fiorina left HP and since then its performance has continued to lag the overall stock market. In fact, since cresting above $50 in 2010 its share price has lost nearly half its value, even after current CEO Meg Whitman managed to pull it back from the brink of disaster after bottoming out below $15 three years ago. Most recently, it has been on the decline again which has spurred the company to break itself up into two separate businesses.

All of which begs the question: Is it too late for anyone to save HP, or is it a sleeping giant about to reclaim its former glory? To find out, for this issue’s In Focus article I asked our resident large-cap tech expert Linda McDonough to take a hard look at Hewlett Packard to determine if its impending divestiture could be the catalyst for renewed excitement about the stock.  

Another stock we’re watching is RingCentral, which Rob DeFrancesco covers in our Sector Spotlight. Like Hewlett Packard it has seen its share price pull back recently, but unlike HP it is still trading far above its IPO price of $13 of two years ago.

However, Rob isn’t waiting to add to Tableau Software to his Next Wave portfolio as he explains in his Portfolio Update. The recent stock market correction has brought its share price down to an attractive level, so we suggest buying it now before it recovers. And as they like to say on the late night infomercials – but wait, that’s not all! – Dr. Duarte is also adding a new holding to his Medical Profits portfolio which he describes in his Portfolio Update.

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