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TheDumbMoney (59.34)

Sold Out Honda and Hewlett Packard Yesterday

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May 16, 2012 – Comments (10) | RELATED TICKERS: HPQ , HMC

I sold out of these two stocks yesterday.  I'm currently holding the cash.  The CAPS picks are now closed. 

With Honda (HMC) I went back and reminded myself why I bought it.  I bought it during the financial crisis at something like $18/share.  I should have sold it when it got to $40.  Instead I forgot why I bought it and started treating it as a longterm hold, simply because I told myself I like to hold stocks forever.  I did, and I do, but I have always thought that the Korean car manafucturers are likely to eat a nice chunk of HMC's and TM's lunch in the near term (next ten years).  That, combined with the new, more cost-efficient structures for GM and F and Chrysler under Fiat, is not a recipe for a long-term hold of either HMC or TM.  It's just one man's opinion.  So I did what I should have done a year ago and a cashiered my still-large gains.  I think the buy was not a mistake.  But forgetting why I bought it was a mistake.

With HewlettPackard (HPQ) I just started to think, you know what, I've got tons of tech exposure, and why should I be in this stock when I think Intel and Microsoft and Apple and Google are all much better long-term holds.  Again, why did I buy?  I bought because I perceived value in a turnaround play.  Not only that, but I did so before there was a clear catalyst for the turnaround.  Not only that, but as Jeff Matthews has blogged about many times, HPQ is a serial manipulator of its earnings.  Not only that, but even if Meg Whitman turns it around, it's a generally low-margin business, and getting lower-margin, as EDS services are not particularly high margin.  Maybe it gets turned around, maybe it doesn't.  But I'd rather have my money in Apple or even in Microsoft or Intel or Google, if I'm going to play in this sector.  So here I have decided I made a mistake, not a terribly costly one, but a mistake.

As a reminder, I used to be "dumberthanafool."  Also, I have another CAPS player now, called "TheDumbMoney2," which actually tries to play the CAPS game as it is meant to be played.

10 Comments – Post Your Own

#1) On May 16, 2012 at 12:56 PM, Frankydontfailme (27.34) wrote:

How about SSYS instead of HPQ?

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#2) On May 16, 2012 at 3:24 PM, EnigmaDude (95.73) wrote:

Actually, I'm thinking that HP might be a good long-term pick right now so I was surprised to read your blog.  But yeah, if you already own MSFT, AAPL, INTC (and GOOG?) you probably have enough tech exposure already. 

If I could I would probably look to add some CSCO shares to my IRA though. I think in 10 years the shares at today's prices will look like a bargain. (Of course, investors probably thought that about MSFT and INTC 10 years ago!)

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#3) On May 16, 2012 at 4:13 PM, TheDumbMoney2 (98.48) wrote:

Oh yeah I forgot to mention I hold CSCO, too.  :-)  And GOOG....  :-)

One of my major operative theses is that the entire tech sector is out of favor right now.  It's a consequence of of the hysteria from ten years ago, and the resulting decade of crappy returns (ex Apple).  So now they are finally (mostly) all quite undervalued, and that will continue for some time, since the "cool kid narrative" (the same "cool kids" who were pumping them thirteen years ago at a 60-100 P/E)  is that they have "no moats" and all "about to be the next RIMM." 

I don't think HPQ is bad.  I just think APPL, MSFT, and INTC are all better. And I think all three of them have better defined catalysts than HPQ does.  I think HPQ will be around a long time and be fine.  I just don't see any marginal utility in owning it in addition to the above three companies.

 

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#4) On May 16, 2012 at 4:15 PM, TheDumbMoney2 (98.48) wrote:

Oh and Franky,

http://www.google.com/finance?q=NYSEARCA%3ASLV#

See ya at 22!  :-)

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#5) On May 16, 2012 at 4:31 PM, Valyooo (99.81) wrote:

Dummy,

I don't really know much about the tech sector.  I like AAPL for many reasons, but other than that, I will not try to pretend to know the field.

That being said, I agree with you on the cool kids saying there is no moat.  I think the term economic moat is incredibly over used.  I think the only companies with a moat, are ones with government granted priveledges (JPM, some railroads, etc) because they legally cannot use the same tactics.  Other than that there is no reason one company can't mimic another, there is no real moat. 

KO vs PEP...yes KO is much better imo, but it would be much harder to reverse engineer AAPL technolgoy than it would be to figure out KO's formula.  Yet KO is seen as having a huge moat, and no tech companies are.

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#6) On May 16, 2012 at 4:39 PM, Frankydontfailme (27.34) wrote:

Yeah looks like Silver could head lower. If it reverses at 26 with volume then you'll be wrong, otherwise 20 could be in the cards. Fortunately I don't know own any silver miners (do have some coins though.... about 7.5% of me). I'm not putting any real skin in the game though. I'd actually be happy to congratulate you on this call because I'd love to buy some of these miners at silly prices..

Check out SSYS!

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#7) On May 16, 2012 at 5:01 PM, Frankydontfailme (27.34) wrote:

Also Apple looks to continue lower, Einhorn's comments may have bailed you out but I doubt it... buying before 520 was silly whatever the result ends up

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#8) On May 17, 2012 at 1:04 PM, TheDumbMoney2 (98.48) wrote:

Heh, Franky, see my prior comment on Rick Munariz' article about Apple:

http://www.fool.com/investing/general/2012/05/12/are-you-waiting-to-buy-apple-at-527.aspx

I fully exect to see $527 or lower at this point.  From a fundamental perspective it's a buy at $500, $527, $550, $570, or $650.  I'll be adding.  When I added at $570 the trend was much less clear.  I'm happy with that purchase, and happy to get more as it goes lower.

DM

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#9) On May 17, 2012 at 1:28 PM, TheDumbMoney2 (98.48) wrote:

Valyooo,

I think it's a mistake to think of "moat" in a binary sense, as a "yes" or "no" question.  I think it is more correct to say that no company has an unassailable moat.  That is unquestionably true.  Corporate moats are like the medieval moats of old -- they have varying widths, depths, numbers of sharpened wooden spikes, etc.

Coke has a relatively wide moat, as even if the recipe could be duplicated (which it never has), the brand, the red background with white letters has enormous psychological power.  The moat is in people's minds.  Coke's moat is not unassailable, but the problem for Coke is not other sodas.  The problem for Coke is the decline in popularity of soda in general, as a result of health concerns, both real and imagined.  A lot of people make the mistake of only looking for direct competitors, instead of worrying just as much about category destruction.

I own Coke and love Coke, but I aslo think it is overvalued, as I blogged about here and here.

DM

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#10) On October 03, 2012 at 3:12 PM, TheDumbMoney (59.34) wrote:

GLAD I SOLD OUT ON HPQ!!!!

:-)

 

dm

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