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A Tale of Three Turnaround Stocks

Among BBY, HPQ and JCP, which has a real future?

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  • YTD return: 58%
  • One-Year return: 28%

HPQTo say Hewlett-Packard (HPQ) was in a bit of a mess is an understatement; one of the most iconic of the Silicon Valley names couldn’t find the right management team, was floundering in a world in which it’s PC-centric model was — and is — becoming outdated, and appeared to have no way out of the morass.

Enter Meg Whitman, who actually had the nerve to raise HPQ’s dividend at a time when the stock was getting pummeled — down to $12 a share in November 2012. The company took its licks and hits, writing off disastrous acquisitions like Autonomy, Palm and EDS, and watched its bottom line virtually disintegrate, culminating in a $12.6 billion loss for fiscal 2012.

Well, HPQ isn’t quite a new company, but it’s been reinvented (as pointed out by James Brumley) — cost cutting and tight financial controls are still a big theme, and layoffs right into and possibly through 2014 are in the offing.

The results are still a bit of a mixed bag; third quarter (ended July 31) showed revenues down around 7% year-over-year, but the bottom line is vastly better, with $1.39 billion in profit compared to a nearly $9 billion loss. (Keep in mind, though, that much of that loss came as a result of those write-offs.)

What’s disconcerting is the continued quarterly revenue declines — over the past three quarters beginning October 2012, revenues have declined nearly 9%, a trend that will have to change.

Long-term HPQ will still be around; its install base is still massive, giving it plenty of time to find a way through.

Article printed from InvestorPlace Media,

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