HP (HPQ) has been on my watchlist for a while. Now I've pulled the trigger. The risk/reward profile works for me. The long-term chart still shows an intact overall downtrend. But since the low in February, a short-term uptrend has formed that looks like a possible base is building. It's also possible that this base isn't fully established yet, and the risk of further declines is real. For me, buying here isn't catching a falling knife. The case for a good entry at current levels outweighs the risks.

The valuation stands out. Historically, the market has always applied a low price-to-cash-flow multiple to HP. Right now it sits at around 5, even below that already-low historical baseline. That translates into an OCF yield of over 20%. On top of that, the dividend yield is above 6%. Over the last two quarters, HP paid $0.30 per share each time, totaling around $277 million. Operating cash flow came in at $1.06 billion most recently. That puts the payout ratio below 30%. I consider the dividend well-covered. For value investors, this combination of low valuation and attractive income is hard to ignore. But because it almost sounds too good to be true, the obvious question is: what's the catch?

That brings me to the business model, which might strike some as dated. HP sells things that carried a very different status not long ago. Today, the sale of PCs, notebooks, workstations, displays, and printers with consumables looks like a fading model. In an increasingly digital world, that applies above all to the printing business, which accounted for around 30% of revenue in 2025. The by far larger segment, at nearly 70%, is the broader hardware and software business. That includes AI PCs. HP is leaning into the trend of our time. Growing AI adoption to drive innovation and productivity is part of the growth strategy. Beyond AI-optimized computers, HP is also pushing hybrid systems and 3D printing.

At the same time, the company is shifting from pure hardware sales toward solution-oriented offerings with recurring subscription revenues. Instead of simply buying a device, customers pay regularly for an outcome or a service. Device-as-a-Service, Managed Print Services, and Instant Ink for ink and toner cartridges are examples of this. The target markets span consumers, businesses, and the public sector. I like this direction. I use several HP laptops for my own work and I'm happy with them. A bit of bias is baked into my view here, I'll say that openly.

On the objective side: a strong position in the commercial PC market, cyclical device refresh demand, the hybrid work trend driving managed workplace solutions, and the higher-margin printing and consumables business all count as positives. The risks are real: intense price competition, heavy dependence on hardware demand cycles, rising component costs (DRAM is a current example), and supply chain and geopolitical risks. All of this could keep pressure on the stock. But in the current low valuation, I see a substantial buffer. Further declines don't worry me. HPQ is one of the positions in my portfolio with the best risk/reward profiles, and it's sized accordingly.

Is HP a buy right now? I consider HP a buy at current prices, and it's one of my largest positions. The stock trades at a price-to-cash-flow ratio of around 5, well below its already-low historical baseline, implying a return potential of over 20%. The dividend yield is above 6%, with a payout ratio below 30% and operating cash flow of $1.06 billion. The main risks are intense price competition, hardware demand cycles, and rising component costs. I consider these real, but well-covered by the current valuation.

Disclaimer: This newsletter is for informational purposes only and does not constitute investment advice. I am not a financial advisor. Always do your own research before making any investment decision.

Disclosure: I may hold direct or indirect positions (including options) in any securities mentioned in this newsletter. My opinions are my own and always honest.