Hewlett-Packard's Strong Quarterly Showing

Not to be outdone by the 8 Golds won in Beijing by Michael Phelps, or Jamaica's Usain Bolt's 100-200m World Record double, Hewlett-Packard (HPQ) showed its quickness in dealing with eroding economic conditions and the apparent stagnation in technology spending. The company reported a quarter besting analyst expectations in all key metrics, sending shares higher.

The computer company reported earnings of $2.03Billion ($0.80/share and $0.86/share excluding certain costs), which compared favourably to the $0.84/share expected by analysts. On the revenue side, the street wanted $27.4Billion, but got $28Billion, another plus for HPQ. These positive kept coming for Investors in the form of guidance where HPQ was once again ahead of the curve, hitting analyst expectations for revenue and guiding profit a couple cents higher than previously anticipated.

One of the biggest growth areas, Notebooks, rose 26% for HP, keyed by demand in Europe and Asia, as the computer maker battles for the market share top dog prize with Dell (DELL). This was a big driver for the company this quarter in allowing it to post year over year profit and sales increases of 14 and 10% respectively. Now, Hewlett-Packard is a giant global company, and the attractiveness of foreign business in foreign currency has boosted the bottom line to be sure, but I for one like where management is going and what is being said. Even though a rising US Dollar may prove less favourable for foreign business results in the coming quarters HPQ is positioned in a growth area, with popular products.

While its dividend is nothing to write home about, it does pay one, and HP has I feel, significant growth in front of it, and that's where the money will be made on this investment. Even as the stock climbs several percentage points on the results, it is down about 15% from its highs of the past year, which means it'll have work to do through this quarter and next to rally back near those mid $50s ranges. But I feel much more comfortable hearing a CEO like Mark Hurd, coming out saying "We have a significant opportunity" rather than an executive group that complains about the economy or the tight wallet of today's consumer.

View the HPQ WikiChart on Wikinvest

Disclosure: Author holds no position in the above mentioned companies.

Rally Wednesday for the Markets, Genentech sell-off on Avastin news Sparks Opportunity

Markets were propped up today as economic data came in on the positive end of the spectrum. Employment numbers showed that 189,000 jobs were added, thus giving hope that consumer spending will be stronger than forecast this holiday season. All major US indices were up about 1.5%, with the Nasdaq leading the charge. The Dow gained almost 200 points to end the session close to the 13,500 mark.

Technology, Energy and the Financials were strong in this rally day. Positive sentiment on consumer spending clearly is associated with gadget buying for Christmas and that propped up stocks of Apple (AAPL), Dell (DELL), Seagate Tech (STX), Intel (INTC) and Google (GOOG).

Suffering a setback was bio-tech power Genentech (DNA) as the FDA rejected the use of its oncology drug Avastin. Shares of the company were halted with a loss of 9% already registered. The drug in question was to be used in combination to treat certain forms of breast cancer but the FDA panel voted against approval of the drug for this purpose. Avastin currently bring Genentech sales of approximately $600Million in the first 9 months of the year as it is also being used to treat forms of lung cancer. The approval of the drug for other types of cancer treatment is seen as a major positive for the bio-tech and as such this setback has caused this temporary dip.

Goldman Sachs came out in support of Genentech after the news, as the major Investment Bank said that even without Avastin's approval they saw Genentech being able to sustain 20% Earnings/share growth going forward, and they held out the possibility that given further trials and more data the FDA could still in fact approve the drug for further cancer treatments.

At this valuation I think the selling as a bit overdone and Genentech looks attractive in the mid 60s. While DNA is a bit on the expensive side compared to its peers like Amgen (AMGN) or Teva Pharma (TEVA) the best in breed deserve a slight premium. Avastin's use is continuing to grow in lung cancer use as results for the first 9 months of the year are up 37% year over year.

Investors should take note when the brightest companies are on sale and this is definitely a sale. Genentech is the drug maker on own at these discounted levels. I believe it could be back in the $70-75 range soon but I agree that even without Avastin's approval for Breast Cancer enough growth should be present to propel the stock to its $93/share analyst target within 12 months. A hefty 35% all in premium opportunity on the upside and if Genentech would fall to be valued with its peers at a 20 P/E the downside is $66/share based on estimated earnings of $3.30 next year.

The chance is here and now for this steal!

Disclosure: Author does not own DNA

Market Week ends on a High as Fed and Options Expiration Lead Rally

Markets in North America climbed back amongst heavy losses early in the week as the US Fed cut the Discount Interest rat by half a percentage point. This is the rate that banks borrow from the Federal Reserve. The news sent stocks flying early Friday and the rally held steady in the late afternoon led overall by the Financials.

Positive earnings and a positive outlook from Hewlett-Packard (HPQ), Dell's (DELL) internal earnings audit completion and general bargain hunting helped Technology put the Nasdaq ahead by almost 2.5%. Options Expiration also helped fuel some of the buying as several big tech names hit even strike levels. Whole Foods (WFMI) completed another hurdle in its attempt to acquire Wild Oats (OATS) which in turn made company shares jump 7% and 17% respectively.

Thursday's quick climb from the aftermath of a morning 300+ point Dow drop continued Friday and the major indices almost climbed back to even for the week. The TSX in Canada was also led by Financials but the market saw a 400 point gain close to only 200 by the end of the day. Canadian currency gained strong on the US rate cut news and the Bank of Canada went back on its plan for a rate hike later this fall. The markets in North America are still in uncertain and turbulent times, however Friday showed that on positive news buyers are there just waiting to jump in.

Hewlett-Packard Firing on all Cylinders with Earnings Beat

Hewlett-Packard (HPQ) reported today after the close. The results were nothing but positive as the largest computer maker continued to take market share from its main rival, Dell (DELL). The computer maker reported $0.71/share earnings excluding items on $25.4Billion in revenues.

Both figures topped estimates and the revenue number showed top-line growth of 16%. That's good news for HP investors, however the better news came with the company forecast for next quarter. Forecasting 2-3 cents higher than previous analyst estimates showed that indeed all businesses are doing very well and growth is set to continue worldwide. Shares of the company hit a 52-week high of $49 recently and have not fallen as hard as other growth tech names such as Apple (AAPL) or Research In Motion (RIMM).

The growth in PC shipments for the company shows that it is on par with high growth Apple machines in the sector as both companies continue to leave Dell in the dust. IDC market research reports showed recently that HP increased its PC shipments by over 35% year over year. Dell is trying desperately to lure customers back but HP is working very well in all channels and is the PC of choice while Apple is enjoying its great success with Macs.

The cost cutting plans implemented by management a couple years ago are paying dividends now as HP competes in all PC sectors and is widening its market share lead across the globe. Even the printer division is doing better as market share is being taken from Lexmark and Dell here also. HP trades at a forward P/E multiple in line with IBM and several points cheaper than Dell. This is a bargain of a growth technology company with the Price-Earnings-Growth ratio now under 1.

The market trends currently don't support heavy bullish buying as credit fears and liquidity problems sweep across all sectors but a winner is clearly here in HPQ and its difficult to stand idle when solid growth like this is available for such a discount. Hewlett-Packard proved in its latest quarter that it is the biggest and best PC company in the world. Investors should take notice.

Disclosure: Author is long AAPL and holds no position in HPQ, DELL, RIMM