From Richard Band's Ten Bagger Stock List.
"Compaq: New Blood Will Save the Patient
My first pick is the high-tech stock "everybody" loves to hate: Compaq
Computer (NYSE: CPQ). Under former Chairman Eckhard Pfeiffer--who got
the boot in April--Compaq came out of nowhere to establish itself as the
world's #1 producer of personal computers. CPQ walloped IBM, Apple and a
host of lesser rivals. Unfortunately, Pfeiffer failed to notice Dell sneaking up
behind him. While Compaq is still the volume leader in PCs, Dell has eaten
into CPQ's profit margins by selling cut-rate via the Internet.
I suspect, however, that new blood at the top will revive Compaq's fortunes.
We don't know yet who the new CEO will be, but the winning candidate will
almost certainly redirect the company's marketing efforts to goose Internet
sales.
Happily, CPQ has the financial muscle to survive and reinvent itself. Unlike
so many high-tech companies that have vanished over the years, CPQ has
no debt whatsoever --and $4 billion in cash. Don't forget, too, that Compaq
boasts a stronger technology base than Dell, thanks to CPQ's recent
acquisitions of Digital Equipment and Tandem Computers.
Yet, the stock--in the wake of Pfeiffer's firing--has plunged to about half its
January high. CPQ shares are trading at only 15X a reasonable estimate of
next year's earnings. That's a recipe for explosive gains when the tide turns.
What to do now: Buy CPQ at $28 or less. I'm projecting a share price in the
mid-to-upper $30s before year-end and $80-$100 within the next three or four
years."
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