The froth in stock markets continued last week, which would normally suggest that investors be more cautious. The equal-weighted Nasdaq index rose nearly 1% on the week, adding to the 21.5% year-to-date gains as measured by the PowerShares ETF (QQQE). The S&P 500 performed even better, up 2.16% on the week and is up 17.75% in 2013.
The likely dangers that could lie ahead for investors will be companies reporting quarterly earnings this week.
Enterprise Software Plays
Already up 50% in 2013, Hewlett Packard (HPQ) could move higher if the company reports faster than expected progress in its turnaround. Even if shares do not rally, investors should look at HP as a long term investment idea. HP needs to shed losing assets, reduce operational costs, and grow sales in enterprise software. HP reportedly wanted to sell its Autonomy, a unit it overpaid for, to SAP, but SAP was not interested. HP paid $11.1 billion for Autonomy in 2011, only to write down the majority value in the company.
Despite the drag from Autonomy, the unit is strategically important for HP, as Big Data is an area that is growing rapidly.
PC Sales should be expected to be weak for HP. When Dell reported quarterly results, PC sales, which accounts for 49% of total sales, dropped by 2%, while notebook sales declined 16%.
HP Reports results on Wednesday, May 22 2013.
In the service cloud space, Salesforce.com (CRM) will report results on Thursday, May 23. An analyst at Wedbush wrote a glowing report on the company ahead of the report, citing higher sales, potential for sales to large accounts, and sales discounts limited to the low-end.
Short selling volume is 9.1% of float while shares are hovering near a 52-week high. In late April, Salesforce.com launched Social.com. The solution is touted as integrating social media advertising and monitoring.
NetApp (NTAP) reports results on Tuesday May 21, as shares hover near a 52-week high. The company is working with Goldman Sachs to increase shareholder value. Options include returning cash, proposing a new director, and cutting jobs in the units that are underperforming.
NetApp rose 7% last week after a nearly 5% position was taken by Elliott Associates. The position suggests that a push will be made to change the board. Elliott Associates was responsible for pushing for the privatization of BMC Software. BMC was sold to Bain Capital and Golden Gate Capitall for $46.25 per share.
Written by Chris Lau