Why Hewlett-Packard is Goldman Sachs’s Top Tech Stock in 2008

Most investors have been dumping technology stocks this year like a bad date. But if you are bullish on technology, what would you invest in?

In a research note published on Jan. 3, Goldman Sachs technology research team recommended Hewlett Packard as its top tech stock for 2008 (in addition to IBM, Ingram-Micro, and Seagate). Why? GS says HP lies at the intersection of three trends:

1. Tech valuations remain low; Goldman says the overall price to earnings ratio of tech hardware stocks is below the S&P 500.

2. PCs have more staying power than people realize, even with “further slowing in the US and Western Europe.”

3. Tech demand from small and medium-sized businesses should outpace corporate spending in 2008.

 I would add two more reasons to be bullish on HP.

1. Excellent management: Mark Hurd has been working wonders over there.

2. Overseas Exposure: HP maintains the highest percentage of overseas sales of any large cap tech company, deriving 67% of its sales from outside the slumping US. That compares to 61% for IBM, 45% for Cisco, 44% for Dell, 39% for Microsoft and 32% for Yahoo!

Wall Street Newsflash: Laura Conigliaro, one of the smartest tech analysts on Wall Street, has recently changed jobs and become co-director of U.S. research at Goldman Sachs. David Bailey, who told me the news a few days ago via email, has now taken over coverage of tech hardware. Congrats Laura and David!

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