EMC Corp (EMC)

Harry0925 (< 20) Submitted: 6/12/08 5:03 PM : Start Price: $16.33 EMC Score: -4.53

This is a situation just like the CY stub trade that made me 15% in 3 months. EMC's core business is expected to earn a little over $1.25B this year. If you strip out their stake in VMW this leaves you with a stub valued at 8.5x earnings. No large-cap tech stocks trade for this multiple. ORCL, INTC, and CSCO all trade for 15x forward earnings. MSFT, the cheapest of the big-cap tech stocks trades for 13x earnings. EMC is a leader in its core business and deserves a valuation that would imply 50-75% upside. If the tech sector ever regains its footing, returns should be higher. I believe by next year, more or all of VMW will be spun out of EMC and this big relative valuation gap will have dissappeared.





This is a trade that probably couldn't happen in real life unless a couple of hedge funds got hit with redemptions and had to unwind this trade. If that does happen, I will pounce.

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