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Avery large flaming piano. This morning with large write off/possible fraud at acquired co

Sw
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A very large flaming piano.

The harder some objects hit the ground the faster, and higher, they bounce back. This is hardly the case with flaming pianos though; they tend to disintegrate and smolder.

I'm still not sure, at this juncture, what kind of object HP is…

kelbon
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The harder some objects hit the ground the faster, and higher, they bounce back. This is hardly the case with flaming pianos though; they tend to disintegrate and smolder.

I'm still not sure, at this juncture, what kind of object HP is…


I'd wait until after they have to suspend their dividend because they're having trouble servicing their debt.
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No. of Recommendations: 4
A very large flaming piano.

It sure is! Man, what a nightmare. "Nah, we didn't overpay, the numbers were cooked!"
Even if true, what a boondoggle.

It's trading at $11.83, so I just doubled my position.
From almost nothing to not-quite nothing.

FWIW, the lowest EPS estimate among 33 analaysts is EPS=3.25 for the year ending Oct 2013.
So that most-pessimistic forecast puts them at a P/E of 3.6x.
I don't normally believe analysts at all, but hey, that's a really small number dude.

Should be fun to see what the stock price does when they cut the dividend.

Jim
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I'd wait until after they have to suspend their dividend because they're having trouble servicing their debt.

Things would have to get a fair bit worse for debt to be a big problem.
They generated over $4bn in cash from operations this past quarter,
and ended the quarter with over $11bn in cash.
With debt only $10bn more than net cash, they have huge coverage.
For a while.

Jim
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No. of Recommendations: 7
With so many attractive alternatives among IT companies which face short-term, business cycle issues and/or fiscal cliff panic, why bother with HP's seemingly endless list of self-inflicted wounds which might take years to fix. You yourself have suggested STX, INTC and APPL recently. CSCO and MSFT are not bad either.

HP is probably like BP; after years of mismanagement, eventually it might reward the patient investor who bought near the lows.

And taking of oil producers, APA and DVN also look extremely attractive, with APA now selling at book value, an extremely rare occurrence. Both have highly regarded management too.
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This is one of the reasons why I don't believe in a concentrated portfolio. No matter how much you may think you know about a stock you can't know everything. Not even a CEO knows whether someone is committing some kind of fraud, crime, etc. that may seriously harm or destroy the value of a stock for a period of time.

Now if you are worth $10M and have millions in cash and want to invest $4M or so in a concentrated portfolio maybe that works but if you have your entire retirement (assuming a sizable amount) account in 4-8 stocks I would have a tough time sleeping.

I'm sure others may disagree but I'd prefer a more cautious approach.

Rich
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I'm sure others may disagree but I'd prefer a more cautious approach.
I am against concentrated portfolio because most average investors don't have the skills and resources for that.

Having said that, if you are running a concentrated portfolio, most likely you would not invest heavily in a company like HP.

BTW, what happened here is not a case of just fraud, we will come to know how much of it is fraud, but gross serious incompetence at the management and board level. You can't make a purchase and write off 90% in such a short time and that is $9B, and sometime back they pi$$ed off $1B on Palm.

The incompetence at this company is freaking unbelievable.
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With so many attractive alternatives among IT companies which face short-term,
business cycle issues and/or fiscal cliff panic, why bother with HP's
seemingly endless list of self-inflicted wounds which might take years to fix.


Answer: entertainment value!
At 0.1% of my portfolio I can afford to take a flutter.
I went for $13 call options at $1.45. By fat the most likely outcome is that I lose $145.
If they go back to their 52 week high I make $1555. As I say, pure entertainment value.
Plus, it's faintly possible that they will have a very different reputation in a year.
Maybe flattish revenue but rising earnings & share price and a secure looking dividend.
Weirder stuff has happened.

With hindsight the main problem with the acquisition was clear:
you can't successfully take over a company called "autonomy".

Jim
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Answer: entertainment value!
...
I went for $13 call options at $1.45. By fat the most likely outcome is that I lose $145.


I decided a quick buck on a wounded animal like this was enough for me, so I sold out.
The $13 calls I bought at $1.48 are now at $3.20
The $15 calls I bought at $0.95 are now at $2.23

There really are better fish in the sea, which somehow becomes even more apparent after a doubling.
But it was entertaining, so my investment goal was met.

Jim
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No. of Recommendations: 2
Ha, I love to remember my winners and mostly forget my losers.

Except:

USG: Which taught me that even when you're right the economy can make you wrong. Even though I did make up any losses and got a nice vacation out of it last February.

Fuqi, now Fuqi.pk which taught me the perils of the Orient, where accounting isn't accounting, financials aren't financial, and the goal of a private business to be a stepping stone to a good state job.

Congratulations!

bob
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