2 Dow Stocks Rising in a Down Market

After opening higher, stocks are now lower on the day: the Dow Jones Industrial Average (INDEX: ^DJI  ) and the broader S&P 500 (INDEX: ^GSPC  ) are down 0.47% and 0.37%, respectively, as of 1:25 p.m. EST. It's a sea of red in the Dow, with the ratio of gainers to losers better than 3-to-1. Two stocks that are managing to post gains are Cisco Systems (Nasdaq: CSCO  ) and Hewlett-Packard (NYSE: HPQ  ) .

As I mentioned in this column, Cisco delivered the goods in its results reported after yesterday's market close, beating on earnings per share and revenue. The shares popped nicely in the after-hours session, so it's no surprise to see them up 5.9% today.

But what of HP, which is up about 0.4% on the day? Absent any relevant news, is it right for the shares to trade up in sympathy with Cisco's?

On the face of it, the two companies certainly share some similarities: They're both "old tech" stalwarts that are important suppliers of technology infrastructure to businesses. Furthermore, although HP's situation is much more dire -- it is in the process of a fundamental turnaround under former eBay CEO Meg Whitman -- both shares have been dreadful laggards, as the following five-year chart shows:

HPQ Chart

HPQ data by YCharts.

It turns out that the correlation between HP's and Cisco's normalized quarterly EPS going back to July 1993 is very high at 0.78. (Correlation, which takes on values between minus one and one, is a statistical measure of the degree to which two variables move together. A correlation of one indicates "perfect" correlation.) HP and Cisco share roughly the same fiscal quarterly calendar, which doesn't coincide with the calendar year, and HP will next report its results for its quarter ended Oct. 31 on Nov. 20. In that context, perhaps HP's gains today are a rational response to Cisco's earnings surprise.

Back to Cisco, though: Even after today's pop, the stock is still valued at less than 10 times the forward EPS estimate. If you want a comprehensive assessment of this opportunity, click here to receive our premium report, which includes a full year of updates.

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2112786, ~/Articles/ArticleHandler.aspx, 10/23/2016 2:12:31 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 day ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:00 PM
CSCO $30.15 Down -0.01 -0.03%
Cisco Systems CAPS Rating: ****
HPQ $13.80 Down -0.30 -2.13%
HP CAPS Rating: ***