It goes without saying that, in a recession the financial community can really overdo it on the downside, with certain stocks, and EMC Corp is in that category.EMC Corp. (NYSE: EMC) is a major player in network storage and security, and when the recession hit, Wall Street adjusted downward corporate IT spending estimates, and of course took EMC's shares down with it. Shares plunged from a pre-recession high of about $25 to lows around $8 -- way oversold. Talk about haircuts!
Revenue in F2009 should be flat, due to weak U.S. demand, but the eye-opener here is emerging market business. Market share gains in China and the Middle East mean EMC is well-positioned to weather the U.S. slowdown, and look for institutional investors to start piling into EMC as 2009 progresses, in anticipation of a U.S. recovery in late 2009. The global trend toward more data security and network protection also is favorable for EMC. The First Call F2009 / F2010 EPS estimates for EMC are 89 cents / $1.02.
Finally, a U.S. Justice Department suit alleging EMC fee arrangements with systems integrators and other partners, if proven true, is not expected to have a major impact on earnings.
Stock Analysis: EMC Corp. is a moderate-risk stock. Consider buying a 25% position in EMC now; then buy another 25% in three months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your EMC position in the first half of 2009. Sell / Stop Loss if you were to buy shares in this company: $7.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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