Are Dell, HP and Netflix on the Endangered Holdings List?

By Kyle Metivier - August 9, 2012 | Tickers: DELL, HPQ, NFLX | 0 Comments

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“If you always do what you’ve always done, you’ll always get what you always got.” – James P. Lewis

There are several occasions where I punch myself for not paying attention to my own advice. There are even a few instances when I follow my advice and walk into a stinking mess. And then there are those sublime moments when I do absolutely nothing, because I don’t like it, for whatever reason. Sometimes the best course of action is a lack thereof, and this market has been riddled with successful periods of waiting.

I’ve been hard on Netflix (NASDAQ: NFLX), a couple of times, but this year it has been tremendously easy to pile on this wounded animal. When I first mentioned it, with more than several words to the wise, the stock closed trading around $123 (2/6/12). The impetus for the post was a mere mention from my son, which forced me to do some digging, hang out on an earnings call here and there, even do an evaluation on my family’s subscription to the DVD rental and streaming service. I have never owned Netflix stock, although I did kick the tires quite a number of years ago in the mid $30’s. Of course, that left me kicking myself when the stock soared to over $300 last summer (July 13^th), but it has been an unsettling ride since July, 2011 and I have concerns about the increasing number of competitors entering the streaming space. The stock has gone through a tumultuous 2012, opening the year around $86 per share, reaching highs for the year about $40 above that, and now it’s sitting around $58 a share. I still don’t like Netflix and not just because the selections for streaming become more and more anemic. At some point in the not-too-distant future I think the DVD player, much like the VHS player before it, will ultimately no longer take up shelf space in home entertainment systems. I can name one DVD I watched this year, because I forget the name of the second one I watched. This recent realization has me not only canceling my DVD subscription, but considering I can’t think of anything I have viewed on my Roku, it’s quite possible the streaming may soon go away for me, as well. And not because of the Olympics, as was suggested by the company when they lowered guidance recently.

I haven’t had reason to talk about Hewlett-Packard Company (NYSE: HPQ), because I have never liked their products, their support, and as such, found no reason to substantiate spending any time looking at their stock. It’s sad, yet strange, the timeline and similar swoon that HP shares with Netflix. Just last summer, when Netflix was about to experience a market cap meltdown, HP was coming off 2011 highs in February around $48 per share before tumbling to the lows for that year in August, along with everyone else, it seemed. Their high for the month of July, 2011 was above $37 a share, and it currently trades for almost half of that, near the low end of their 52-week range of $17-$34. At least the company pays shareholders for whatever patience they have left, offering a 2.9% dividend yield, paying 53-cents per share annually. Keep an eye on that dividend, and keep your ears peeled for the next earnings call, August 22^nd, if you have any interest in this stock.

In a former life, I worked in several IT capacities with client/customer support, and most experiences with HP, their equipment (desktops, especially printers), and their product support forced me to seek alternative solutions, which led me to Dell, Inc. (NASDAQ: DELL). Their products were solid, their support, at the time, was far superior, and I actually invested a little money after hearing Michael Dell was returning to right the ship. The stock trades lower than when I bought it almost four years ago, and is currently closer to the low-end of the 52-week range ($11-$18), around $12 a share. I made next-to-nothing with my Dell investment, nor did I benefit from a dividend; the company doesn’t pay one. If you have any desire to check out what’s happening just south of me in Round Rock, Texas the company reports earnings August 21^st and may give some indication of what to expect from HP the following day.

As I have mentioned many times, good companies adapt to market conditions and offer their customers more options than a different color laptop, or a printer that rendered the one previously purchased obsolete, or the cancellation of a monthly service. Take note as to what is going on in your environment, your personal wants and needs, as well as those in your households and workplaces. I’ll be interested to see if these names are still around several years from now.

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