Big winner
As I mentioned, shares of Hewlett-Packard Company (NYSE:HPQ) have risen more than 71% since the start of 2013. The next best performing Dow stock is American Express Company (NYSE:AXP), which has increased by 31.72%, and then The Boeing Company (NYSE:BA), which is up 31.4%. Coming in fourth is fellow technology- and PC-related company Microsoft Corporation (NASDAQ:MSFT), which has gained 30.66% this year. But neither Hewlett-Packard Company (NYSE:HPQ) nor Microsoft Corporation (NASDAQ:MSFT) has gotten a boost from the PC industry this year. Rather, weak PC sales have more than likely hurt both companies in 2013.
After having a dismal 2012, Hewlett-Packard Company (NYSE:HPQ) is crushing the market and its fellow components this year, mainly because of her CEO Meg Whitman and her turnaround strategy. Whitman has explained that her plan will take roughly five years to complete and that the company is currently about 18 months into that time frame. From what we’ve been told, the turnaround plan is to lessen Hewlett-Packard Company (NYSE:HPQ)’s reliance on the PC industry and move the company into a more well-rounded and balanced technology firm — one that will offer top-of-the-line servers, cloud computing, information optimization, and data security.
On paper this all looks really good, and Meg Whitman is a great promoter when she’s in front of crowds of investors and analysts. The company expects revenue to grow in line with GDP by 2016 and operating profits to grow faster, while leading the industry in margins and having discipline when it comes to capital allocation. Furthermore, the company is currently delaying research and development investments and allowing market share to decline because some deals didn’t contain enough profit.
So this is where I find some problems. What if the U.S. economy falls back into another recession by 2016? What if Whitman and her team see what they believe is a great cheap acquisition candidate and decide to purchase it, but it turns out to be another Autonomy incident? What if, right about the time Hewlett-Packard Company (NYSE:HPQ) gets its newest offering running at full steam, something else new emerges in the technology world that customers soon start to shift toward? My point is that HP is still a struggling company as it stands today. Whether you believe in Whitman or not, a lot of things must go right over the next few years for HP to continue its turnaround. It all brings me to the conclusion that at this time, the risk involved in owning shares of HP is not worth the reward.
The article The Dow’s Best and Worst Stocks, Year to Date originally appeared on Fool.com.
Fool contributor Matt Thalman owns shares of Microsoft. Check back Monday through Friday as Matt explains what caused the Dow’s winners and losers of the day, and every Saturday for a weekly recap. Follow Matt on Twitter @mthalman5513.
The Motley Fool recommends American Express and owns shares of Microsoft.
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