HP was trading well over $40 before the company started playing CEO musical chairs. The stock price was not helped when each new CEO changed course faster than a ping pong ball in in an Olympic match.
Monday, HP broke support at $20, less than half the price the company was trading at about a year ago. The market has effectively priced in a no confidence vote of the management. Not only is the trailing price-to-earnings ratio well under 10 at 7.6, but more importantly, the forward multiple is only 4.42.
I decided at the time I should hang on, but I would rotate out of the current options (covered calls) and move to a more defensive position writing in the money calls. Knowing that if I was wrong about HP the stock had much further to fall, it was the only reasonable way to stay exposed. This game played on for several months. When I seriously questioned if things could get much worse (the dividend yield was climbing from the price drop and the PE ratio was falling too), the other shoe dropped. The second shoe wasn't an Oxford, but one worn by Meg Whitman. I don't care if the CEO is a man or woman, like most investors I only care about making money. I experienced firsthand customer service and leadership of Whitman as a customer of eBay (EBAY) (top-rated in volume and ratings) about 13 years ago. The experience didn't leave a favorable impression of Whitman. I wrote more about the subject in this article.
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