Don't Confuse This Dow Value Trap for a Value Stock

Andrew Tonner
Andrew Tonner
Sep 12, 2012 at 12:00AM
Other

Hewlett-Packard (NYSE:HPQ)

While HP is still the world's largest PC maker, that gap is narrowing, with increased competition coming from Asia. However, the real problem is marketwide, affecting every player in the industry. It all comes down to the slowing demand for PCs, which flattened out in the second quarter of this year.

There were high hopes that Microsoft's (NASDAQ:MSFT)

Some investors may be intrigued by HP as a potential "value stock" right now, especially with dividends up above 3% and falling substantially over the course of the past year. However, Fool.com analyst Andrew Tonner classifies this as a textbook case of value stock versus value trap -- with HP landing squarely in the latter category. Shares may be empirically cheap, but they can (and probably will) continue to spiral downward.

For more, check out the following video.

In a nutshell, if you're looking for strong long-term investments, steer clear of HP and other PC-makers such as Dell(UNKNOWN:DELL.DL)