At Barron's 2012 Art of Successful Investing Conference,
of Delphi Asset Management commented on his stock holdings and
the one sector he does not want to own right now.
"I would avoid the PC stocks,"
. "Obviously, I would not own Dell (
), Hewlett (
) or Intel (
), even though Intel's a great company."
Computer sales have been increasing annually since 2001, but are
expected to decline for the first time in 2011, according to
research from HIS iSuppli. HIS iSuppli forecasts that PC
shipments will decline 1.2% to 349 million, a decrease from 353
million last year. Gartner research reports that PC shipments
declined by 8% in the third quarter, due to lack of the usual
back-to-school PC sales bump.
Both of the research firms primarily blame the iPad for eroding
"There was great hope through the first half that 2012 would
prove to be a rebound year for the PC market," said Craig Stice,
senior principal analyst for computer systems at IHS. "Optimism
has vanished and turned to doubt, and the industry is now
training its sights on 2013 to deliver the hoped-for rebound."
Black has developed a proprietary research process he has
described as "old
-style," in which he requires his stocks to have the following
� Have over 14% return on equity
� Have a strong three-to-five-year record of earnings
and revenue growth
� Have a P/B ratio under 2.5
� Are deleveraged
Some of the stocks he mentioned met a majority of his criteria,
but are facing declining sales in their primary PC businesses.
Return on equity: 34.55
Five-year revenue growth: 5.5%
Five-year EBITDA growth: 10.9%
P/B ratio: 1.71
Long-term liabilities and debt: $13.44 billion
Dell is a computer and services company founded in 1984 and whose
stock has declined 59% over the past five years to trade for
$10.15 on Monday.
In the third quarter of fiscal 2013, the company's revenue from
software and peripherals, mobility products and desktop PCs
reduced 16%, 24% and 14%, respectively, in its large enterprise
segment. Its consumer segment experienced a 23% revenue decline,
due primarily to a challenging pricing environment, a decision to
limit participation in lower-value offerings and competition from
alternative mobile computing devices such as tablets, and smart
phones. Desktop PC revenue in the sector declined 9% in the
quarter, due to a 6% decline in the number of units sold and a 3%
decline in the average selling price.
Overall, the company's revenue in the third quarter fell 11% year
over year to $13.7 billion due to the contraction in desktop and
mobility revenue. GAAP net income fell 47% to $475 million.
Dell is in the process of making a strategic transition to a
portfolio of products that provide "higher-value and recurring
revenue streams over time," it said in its most recent 10-K. As
part of this strategy, we emphasize expansion of our enterprise
solutions and services, which includes servers, networking,
storage, and services. We believe the most attractive areas for
profitable growth include data center and information management
as well as client and cloud computing. We believe software will
enhance our enterprise solutions, and accordingly, in early
Fiscal 2013, we launched our newly formed software group to
expand our ability to execute in strategic areas that are
important to our customers. We now have four solutions groups to
support our global business segments: enterprise solutions,
services, end-user computing, and software."
It is also intensifying its focus on emerging countries and
acquisitions to achieve growth. The shifts in strategy have led
to an improvement in its operating margins.
Return on equity: -55.2
Five-year revenue growth: 13.8%
Five-year EBITDA growth: 12%
P/B ratio: 1.21
Long-term liabilities and debt: $39.27 billion
Hewlett-Packard is technology, software, solutions and services
company whose stock has lost 72% of its market value over the
last five years to trade for $14.22 on Monday. PC, server,
storage, networking and imaging and printing products compose the
core of HP's business.
HP is also in the process of transformation. "As we discussed
during our Securities Analyst Meeting last month, fiscal 2012 was
the first year in a multiyear journey to turn HP around," said
Meg Whitman, HP president and CEO.
In the fiscal year ended Oct. 31, HP's net revenue from its
personal systems segment declined for the third year, to $35.7
billion from $39.57 billion in 2011. The decline included a 6.3%
decline in notebook PC sales, a 3.4% decline in desktop PC sales
and a 0.2% decline in workstation sales. The declines resulted
from fewer PCs sold, and was partially offset by an increase in
average selling prices.
Whitman was encouraged to see improvements in new product
releases and customer wins. The company saw fourth quarter
revenue increases in only two of its six segments: software and
HP financial services.
Return on equity: 28.2%
Five-year revenue growth: 9.6%
Five-year EBITDA growth: 21.7%
P/B ratio: 2.09
Long-term liabilities and debt: $13.2 billion
Intel Corp. is a designer and manufacturer of integrated digital
technology platforms. Its stock has declined 23% over the last
five years to trade for $20.62 on Monday.
In its third quarter, Intel reported revenue of $8.6 billion in
its PC client group segment, which was flat sequentially and down
8 percent year over year. Revenues increased year over year in
its four other segments: data center group, other Intel
architecture operating segments, software and services operating
segments and all other.
The company attributed the PC client group sales decline to
weakness in the macroeconomic environment, which caused softness
in both the consumer and enterprise market segments. It also
faced reduced inventory levels in the PC market due to
macroeconomic uncertainty and the expected launch of Microsoft (
) Windows 8. It is expecting a 1% sequential revenue increase for
the fourth quarter 2012.
Our third-quarter results reflected a continuing tough economic
environment," said Paul Otellini, Intel president and CEO. "The
world of computing is in the midst of a period of breakthrough
innovation and creativity. As we look to the fourth quarter,
we're pleased with the continued progress in Ultrabooks and
phones and excited about the range of Intel-based tablets coming
The company is counting primarily on a strong product portfolio,
including: its new Ultrabook to be released in the fourth
quarter, a higher-performance and more energy-efficient server
platform positioned for growth in the cloud computing and
Internet data storage markets, new Intel-based smartphone designs
launched in the third quarter such as the MegaFon Mint in Russia
and Motorola RAZRi in certain European and Latin American
countries, and 20 tablet designs based on its latest Intel Atom
processors expected to be released along with the Windows 8 touch
operating system in the fourth quarter.
Overall, Intel's fourth quarter revenue was $13.5 billion, flat
year over year, and net income was $3 billion, up 5.1% year over
See more of the stocks
would own in his portfolio here. Also check out the Undervalued
Stocks, Top Growth Companies and High Yield stocks of Scott
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