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The 2014 All-America Research Team: IT Hardware, No. 1: A.M. (Toni) Sacconaghi

< The 2014 All-America Research TeamA.M. (Toni) SacconaghiSanford C.
Bernstein & Co.First-Place Appearances: 13

Total Appearances: 15

Analyst Debut: 2001

All-America Research Team Hall of Famer A.M. (Toni) Sacconaghi dominates this list, as he has done every year since first earning the top spot in 2002. The Sanford C. Bernstein & Co. analyst, 49, is “in a league of his own,” one client insists. Another fund manager marvels that “for someone of his tenure, he is also extremely responsive.” As has long been his practice, Sacconaghi limits the breadth of his coverage — he now tracks five U.S. information technology hardware names — believing that “being narrow and deep affords our team an ability to know our companies extremely well,” he explains. In addition, he changes his ratings infrequently, preferring to take a long view. For example, Sacconaghi has for years maintained outperform ratings on Apple and Hewlett-Packard Co., although he has raised his targets for their shares. On Cupertino, California–based consumer electronics giant Apple, he elevated his price objective in May, believing that the June stock split management announced in April could increase liquidity and institutional interest in the shares. Moreover, he advised, gross margins had stabilized, and the larger screens on its newer iPhones could encourage Android users to switch to Apple’s smartphone. The stock was then up 12.8 percent year to date, while the sector had gained 11.1 percent. Subsequently, through mid-September, Apple climbed 14.3 percent higher, to close at $101.63 and lead its peers by 1.6 percentage points. Sacconaghi pegs the shares at $108. He boosted his HP target price in August, citing CEO Meg Whitman’s focus on generating cash flow, stabilizing revenue and cutting costs. While acknowledging that enterprise hardware providers face challenges to their long-term performance, he continues to deem the Palo Alto, California–based company’s shares undervalued and raised his forecast from $36 to $40. At that time, HP was already up 26.7 percent since the end of 2013, at $34.97, and ahead of the sector by 2.7 percentage points; it closed in mid-September at $36.25. “While valuations within IT hardware are inexpensive,” notes Sacconaghi, “dispersion of historical stock performance has been very high, meaning that stock selection is key.” EMC Corp. and IBM Corp. are his favorite long-term plays, the researcher adds, but “Apple and Hewlett-Packard offer the most opportunity for upside through year end.”

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