Stocks were little changed on the day and, indeed, intraday volatility was very low, as the Dow Jones Industrial Average (^DJI +0.49%) and the broader S&P 500 (^GSPC +0.78%) gained 0.11% and 0.03%, respectively.
Hewlett-Packard (HPQ +0.89%) saw the largest gain among Dow components today, with shares up 2.6%, reportedly on rumors that Carl Icahn is looking at the stock. Icahn, one of the deans of activist investing, was famously involved with Yahoo! (NASDAQ: YHOO) -- another troubled technology blue-chip -- in the past, but, as far as I am aware, there is no evidence that Icahn owns HP shares or has any intention of owning them. Still, the rumor is certainly plausible, and that's all a good rumor needs; for heartbroken HP shareholders, it's perhaps the case that hope springs eternal.
Hope can be a powerful force, but in investing, realism is more effective. Anyone thinking of becoming an HP shareholder at this stage should give careful consideration to the words of another successful activist investor -- Bill Ackman, who gave this thoughtful assessment of the situation:
We try to find a business that we can predict what it will look like over a very long period of time. The problem is that HP is in a number of businesses where I think it's very difficult to predict what the business is going to look like five year from now, let alone over the many, many years of a discounted cash flow calculation you need to figure out what the business is worth. So the problem we've had is it looks cheap, but the future of the PC industry is a very, very difficult business to handicap and incredibly competitive. I think the announcement of their intention to spin that business off has, perhaps irreparably, damaged the brand and it's a big, complicated mess.
Ackman made these comments in October 2011; they remain as true today as they were then. Since then, of course, the shares have lost more than 40%.
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