EMC & HPQ

High Tech + Large Cap + Strong Momentum = Buy Pullbacks on These 5 Stocks
MC Corporation (EMC): 25.69



Accelerated technology spending by companies eager to jumpstart growth has boded well for the largest maker of data storage computers. EMC saw its 4th quarter jump 61% as it beat Wall Street’s expectations on both revenue and earnings.

The future looks promising for EMC as companies continue to upgrade current technology and also invest in data-storage technology as they understand cost savings realized by embracing cloud computing, Management expects EMC to gain share in the data storage marketplace.

Analysts have raised their 2011 earnings estimates following the company’s earnings call. Consistent earnings with high profit margins contribute to a strong ROE. Positive money flow activity and a strong price trend vs. the broader market contribute to a bullish price/volume activity.

The stock is back to its high before the 2008 collapse which could provide short-term resistance. However, given its position in one of the most critical technology areas and the momentum it has gathered, we believe such resistance will be short lived and should be viewed as an opportunity to buy on the dip.

Hewlett-Packard Company (HPQ): 47.43



HP, like a troubled superstar player on a championship team, does everything (well, mostly everything) right on the field and wrong off it. While memories of ex-CEO Carly Fiorina and her ouster are still in the present, we now have to digest the ouster of another ex-CEO Mark Hurd.

However, despite all the noise, HP continues to execute much better than many of its peers and competitors on the field. Whether it is gaining market share in the waning PC market, teaming up with Verizon to introduce a 4G LTE notebook, or flexing its muscles in the cloud computing marketplace, it continues to “invent” and grow.

Despite posting consistent earnings with high profit margins and generating strong ROE, HPQ lost 30% in less than 3 months from its 52 week high in May to its 52 week low in August amid the Mark Hurd scandal, losing 20% in August alone following the CEO’s resignation. Since then, the stock has recovered 25% and is back to Mr. Hurd’s preresignation days but still 10% off its 52-week high. The current board is completely revamped following the replacement of many of Hurd’s directors.

The fundamentals of the company seem to be intact. A low projected P/E ratio on 2011 earnings suggests that shares are undervalued at current levels. Analysts are bullish on the company’s 2011 prospects and have raised their estimates. All these factors result in a very bullish rating. We believe that with new management team now in place and the Mark Hurd scandal a story of the past, HPQ will resume focus on business opportunities and growth rather than personalities.

About the author: Marc Chaikin Inventor of the Chaikin Oscillator & Managing Partner at Chaikin Stock Research LLC. To learn more about Marc Chaikin and his actionable decision making tools for self-directed investors called "Chaikin Power Tools" visit: www.ChaikinPowerTools.com. Marc utilizes the...