Stocks in the News: HPQ, FFIV, HBI

Posted: Apr 06, 2013 12:01 AM

Welcome to John Ransom's Stocks In The News, where the headline meets the trendline.

Stocks in the News is produced by Ransom Notes Radio and Goodfellow, LLC. Crista Huff manages Goodfellow LLC, a website that recommends outperforming stocks using fundamental and technical analysis.

Stock number one is:        

Hewlett-Packard Co.  (SYMBOL: HPQ)  and the headline says:

HP Appeases Shareholders with Big Management Changes

Chairman Ray Lane and two Directors are leaving beleaguered technology giant Hewlett Packard, paving the way for CEO Meg Whitman to focus on corporate growth and appease shareholders.

The company suffered from continual leadership changes and a financial disaster brought on by the acquisition of Autonomy Corp.  HP’s turnaround plans include a focus on sales of more lucrative software.

On March 21, we recommended that investors sell Hewlett-Packard shares, based on falling earnings per share and a bearish chart.  We still think investors would be better served owning stocks with earnings growth and clear corporate vision.   

Our Ransom Note trendline says: SELL HEWLETT PACKARD SHARES

HPQ Chart

HPQ data by YCharts

Stock number two is:        

F5 Networks Inc., (SYMBOL: FFIV) and the headline says:         

F5 Networks Falls on Forecast Blunder        

F5 Networks Inc., maker of networking technology, has sharply lowered Wall Street’s expectations for second quarter revenue and earnings per share due to slower North American sales.  The stock is down dramatically on the news.     

F5’s forecasting errors could easily be attributed to growing pains, as this aggressively growing company eventually learns to anticipate the seasonal demand patterns and changes in product cycles that more mature companies take in stride.     

Citi Research adjusted its earnings per share forecast today to show flat numbers for 2013, then growth of 10% and 13% in F5’s next two fiscal years.  After today’s drop, watch for price support at $70, and a possible rebound this year to the mid-$90’s.     

Our Ransom Note trendline says: STAY ON THE SIDELINES    

FFIV Chart

FFIV data by YCharts

Stock number three is:     

Hanesbrands Inc. (SYMBOL: HBI) and the headline says:          

Hanesbrands Initiates Dividend        

Consumer goods company Hanesbrands Inc. announced the initiation of a 20-cent quarterly dividend, with a current yield of 1.7%.             

Balance sheet numbers run hot and cold at Hanesbrands.  Earnings per share growth is expected to be 29% this year, then rapidly slowing to 5% in 2015.  Annual revenue has been relatively flat for several years.  The company’s debit-to-total capital level runs more than twice as high as its industry peers, which makes it vulnerable to credit problems.    

The stock broke through long-term resistance in the mid-$30’s in early January and has had a 30% run-up in price.  This is a good time for shareholders to move on to a stock with a better balance sheet.           

Our Ransom Note trendline says: AVOID HANESBRANDS

HBI Chart

HBI data by YCharts

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