Hewlett-Packard Stock is not one that I trade very often. The company in the past was poorly managed in my opinion and revenue while strong failed to filter down to the bottom line. The latest revenue sits at $112.1 billion, yet their profit margin is a weak 5.01%. Imagine what they could do for shareholder value if the profit margin was increased by even 1%. Management has been largely ineffective in improving shareholder value.
Hewlett-Packard pays a .58 cents annual dividend and trades at a respectable 11.7 times price to earnings and just 6.2 times price to cash flow. It is not expensive no matter how you look at the company. It has a cash flow of $5.06 per share and book value of $14.29. The problem remains with profit margins which is why shareholder value is so low and the stock is not trading at higher multiples.
Investor Stuck With 23 Credit Put Spreads As HPQ Stock Falls
Recently an investor wrote me seeking advice on what could be done to put in place some rescue strategies should HPQ Stock continue to falter. The past week has seen the stock pull back from highs it has not seen since the middle of 2011. The rescue strategies article is lengthy at more than 3400 words. It will take 9 pages if printed. The reason for the length though is to explain not just the 6 rescue strategies but to look at how to approach putting in place rescue strategies that meet the goals of the investor.
Rescuing or repairing trades is a common occurrence for investors who trade often. Those of us who love doing option trades know all too well that using the right rescue strategy can keep a trade profitable and have it end successfully. Often one rescue strategy has to be combined with another or even more than two as the trade unfolds. But using the right rescue strategies can actually improve a trade’s profit potential.
This is a full strategy discussion that discusses how to approach a rescue, how to determine an outlook for a stock before applying a rescue and then delves into 6 rescue strategies that could be considered to assist in keeping the trade profitable no matter whether the stock moves up, down or sideways.
This is a FullyInformed Members strategy article dealing with credit put spreads but the material can be applied to other stock and option trades as well.