HP Has $20 Written All Over It... Again

| About: HP Inc. (HPQ)
This article is now exclusive for PRO subscribers.

Got a confession to make. I'm recycling the title. I wrote a piece entitled "HP Has $20 Written All Over It" to make the short case when the stock was trading at $26. The stock tanked as predicted (and in fact cratered to $16). Now Hewlett-Packard (NYSE:HPQ) has fallen so much, I'm going long. So here goes: HP goes to $20.

Four reasons HP is a twenty:

1. Meg Whitman is wielding a big axe, chopping 29000 jobs costing $3.3 billion. Fewer bodies equals less future overhead. Even more important, it indicates a move to a smaller and more focused HP. Impressive cutting by Whitman. HP needed to downsize after overreaching in its acquisitions.

2. She is pushing the personal systems group (NYSE:PSG) and printing together, a wise move. The divisions go together like peanut butter and jelly, driving synergies and cutting costs. And just maybe, HP will eventually spin off the computer/printing divisions together leaving a more compact company.

3. It has an activist shareholder on the board, Ralph Whitworth. As head of Relational Investors, he bought a whopping $400 million position at an average price of $22 in May. Relational Investors are in almost $700 million, their second biggest position. You don't place that big a bet unless you are sure of your position. Who doesn't wish for this kind of inside knowledge? Investors get to buy their shares at prices lower than Whitworth.

4. HP trades with other decimated tech stocks - RIM (RIMM) and Nokia (NYSE:NOK). They've became crushed. Nokia's recent run is emboldening HP longs to do the same. It worked so far for Nokia. Why not HP?

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned. Past performance of the companies discussed may not continue and the companies may not achieve the earnings growth as predicted. The information in this document is believed to be accurate, but under no circumstances should a person act upon the information contained within. We do not recommend that anyone act upon any investment information without first consulting an investment advisor as to the suitability of such investments for his specific situation.