Hewlett-Packard Company (HPQ): You Will Make Money From This Turnaround

Most recently, The Blackstone Group L.P. (NYSE:BX) and Icahn Enterprises have submitted their buyout offers to the committee. Blackstone has offered around $14 per share, in association with other private equity firms. On the other hand, activist investor Carl Icahn has offered $15 per share for a 58% holding. Investors can surely see some decent upside in the stock if a deal is completed.

International Business Machines Corp. (NYSE:IBM), on the other hand, has been fairly successful in keeping its business operations more stable. Most of its earnings growth is derived from higher margins. IBM is relying heavily on big-data and business analytics for its future growth. It’s one of its four growth initiatives, along with cloud computing.

International Business Machines Corp. (NYSE:IBM)is targeting business analytics to grow into about a $20 billion business in the next two years. Acquisitions will be the major contributor under this strategy. In 2012, IBM acquired around 11 companies for nearly $4 billion, out of which most of the targets offer analytical solutions.

The most recent on the list is its acquisition of Star Analytics, which is an analytics software provider. This acquisition will further expand IBM’s portfolio of analytics over the long term and will also complement its previous acquisitions of Varicent, OpenPages, Cognos and others. Based on these initiatives, IBM’s EPS is expected to grow to around $3.05 by 2015.

Conclusion

I feel HP is a defensive investment, considering the large portions of its recurring sales, significant cost-saving initiatives and its investments in big data analytics. Hewlett-Packard Company (NYSE:HPQ) is confidently moving into other sectors, and in the process it is stabilizing its bottom line.

This has been a winning strategy for the company and for investors so far in 2013. I believe this run will continue in the future as well, and this could be a perfect time to enter into this stock in order to gain out more from the turnaround story.

Madhu Dube has no position in any stocks mentioned. The Motley Fool owns shares of International Business Machines.