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Hewlett Packard (HPQ) might be one of the most unloved stocks of 2012. A perfect storm came together this year as the rising popularity of tablets, a weak global economy, and stalled-out PC sales took this stock to fresh 52-week lows. However, it seems that investors and shorts may have gone to far when selling this stock as the current share price seems to be based more on highly negative sentiment and downward momentum, rather than fundamentals. Most investors have seen stocks that go way above fair value when investors get too optimistic. We also see stocks that get pushed way below fair value when investors get overly pessimistic, shorts pile on, and margin call selling forces the stock down to ridiculously low levels. While it is true that PC sales are sluggish, and the printing business is equally boring, Hewlett Packard is still solidly profitable. It also has business divisions outside of PCs and printers, which are seeing growth.

Hewlett Packard shares look incredibly cheap based on a number of valuation metrics. It now trades well below book value which is about $19 per share. It also trades for just around 4 times earnings estimates while the S&P 500 Index trades at about 14 times earnings. Part of the recent pressure on the stock appears to be seasonal as investors often dump investments that have dropped in value during the year in order to harvest tax losses. However, Hewlett Packard shares could see a sharp rebound into 2013 as the tax loss selling pressure ends. This should create some strength in the stock which could then cause some shorts to cover. Over time, the company could be poised to see an expansion in the price to earnings multiple as the company shifts focus to high growth areas such as cloud computing and software.

Hewlett Packard spends about $3.3 billion annually on research and development. That is likely to produce new innovations and products sooner or later. One area that has been "hot" with investors is 3D printing. Sooner or later, I expect that HP will focus on this revolutionary new technology. It already has tested this market with a Hewlett Packard branded 3D printer, however, the company agreed to terminate a deal it had with Stratasys, Inc. (SSYS) for 3D printer distribution by end of 2012. While some investors might see this as a negative, I think it could mean that HP wants more than just a distribution agreement. It might have needed a termination of the deal as a first step towards launching its own line of 3D printers or buying a company that leads in this new industry. There is a good chance that the agreement it had with Stratasys prevented it from manufacturing or selling other 3D printers, and that would be one of many reasons to terminate the deal. It's possible that HP will announce a major foray into 3D printing in 2013, after the agreement has expired.

Stratasys has a market capitalization of around $1.42 billion and revenues of about $178 million. 3D Systems Corp. (DDD) has a market capitalization of about $2.5 billion and revenues of about $322 million. Both of these companies are industry leaders in 3D printing and either one could be easily acquired by HP if it hasn't already developed its own technology and designs. HP has revenues of about $122 billion, so it dwarfs these companies in size. It also shows why the 3D printer market is not yet big enough to move the needle at HP, and this explains why it is taking time to position itself in this fast-growing but still small industry. According to analysts, the 3D printer market is expected to grow to about $3 billion by 2018.

Buying Hewlett Packard now could be a very cheap way to play a rebound and a possible entry into more exciting technologies like 3D printing. With a multi-billion dollar annual R&D budget, it is premature to write off this tech giant, especially at a bargain valuation. Chances are still high that it can regain its footing in future technologies like 3D printing or other areas which are poised for growth. While waiting for HP to transition its business model, investors can collect a generous yield of nearly 4%.

Key Data Points For Hewlett Packard From Yahoo Finance:
Current price: $14
52-Week Range: $13.68 to $30
Dividend: 53 cents per share which yields 3.8%
2012 Earnings Estimate: $4.04 per share
2013 Earnings Estimate: $3.56 per share
P/E Ratio: about 4 times earnings

Data is sourced from Yahoo Finance. No guarantees or representations are made. Please consult a financial advisor before making investments.

Source: Hewlett-Packard Could Be A Cheap Way To Invest In The 3D Printing Boom