Hewlett Packard: its calculators & its stock

Rocky purchased his HP12C Financial Calculator 25-years-ago,  and the calculator has been a loyal, trusted and always-present companion ever since.  It witnessed and assisted in life’s most important moments: 

• It  computed the per-carat cost of Trophy Wife’s engagement ring; and the closing costs of The Humbert Family Estate. 
• It calculated the required vitamin pills during pregnancy, and the travel and parking time to reach the local hospital.
• It provided a “Discounted Present Value” for a lifetime supply of Rogaine.  ($11,000);  the cooking time for a gargantuan slab of discount bbq meat (3 days); and the hours required on a treadmill after eating the slab of meat (3 days).
• It inspired The Second Law of Rocky.
• It deserves credit for  every successful (and unsuccessful) arbitrage that Rocky executed over the past 25 years.

Desite dents, scratches and worn feet, HP12C never let Rocky down.  Yet suddenly,  two days ago, age caught up to HP12C. The display dimmed,  and commas/periods randomly appeared and disappeared. 

Even though Trophy Wife hates Reverse Polish Notation “RPN,”  she recognized the dangers of an unreliable financial calcuator, and located the tiny replacement batteries in a nearby town. Alas, new batteries did not fix the problem: HP12C was approaching the inevitable end of its life…. (Sentimental readers: the YouTube Video of the Byrd’s song “Turn Turn”  is here:

 )

But in calculators, as in life, there is always a silver lining!  As HP12C faded, Rocky studied the financials and prospects of HP Corporation (HPQ), and concluded that it could be an interesting investment… if entered at the right price. 

Amazingly, this opportunity occurred just one-day-later  … as the CEO resigned amidst a sexual harrassment/expense account scandal.  Rocky started buying HP stock around 6pm ($42), because the stock lost $11 Billion (11%) in value on the news. He will buy more if it keeps declining solely because of this resignation news.  (The stock is trading at 9x earnings, so that means Mr. Market attributes $1.22 Billion in EARNINGS and $19 Billion in SALES to the just-departed CEO.  Rocky thinks Mr. Hurd was a fine CEO, but he is neither Steve Jobs nor Warren Buffett, and the reaction presents a Rocky I opportunity.)

[Disclosure: Rocky doesn't believe that the disclosure of his future purchase of a HP calculator constitutes material inside information that will impact HP's stock price.  He appreciates that the CEO's expense account irregularities could be just the tip-of-an-iceberg of  problems. And he never provides investment advice. ]