IDC, very interesting indeed. Check this out:
InterDigital Communications Corp. (AMEX:IDC)
Written by Dr. Bill Dalglish, CFP from information gathered via the TelecomTechStocks.com informal source network.
Why Is the Stock so Cheap? InterDigital shares have the potential for being that "ten bagger" that Peter Lynch describes. So, why haven't potential investors heard of this investment opportunity and bought InterDigital Stock before the beginning of its rapid ascent on Nov. 18, 1999?
1. "Investor Psychology" No matter how thorough the research an investor does nor how compelling the outlook for a particular stock, fear of making a mistake and regretting it later tends to keep even experienced investors from purchasing shares until the share price starts moving up. The more it moves up, the greater the feeling is that "others feel the same positives that I feel," confirming the investor's earlier instinct and providing the courage to buy the stock. While InterDigital languished in the $4 - $5 range without breaking through to new highs, self-doubt prevailed, even though a potential investor may have felt strongly positive about the stock's potential. But when the movement upward begins (as it did for InterDigital on Nov. 18), Katie bar the door. Investors who liked the Company's fundamentals before but either did not buy any shares or bought only a few because no one else was buying, tended to climb aboard with confidence. That's what happened on Nov. 18th (up 10% on 7 times normal volume) and Friday Nov. 19th (up 40% on 17 times normal volume). Assuming the volume remains significantly above average and the price continues to appreciate ( with periodic consolidations), the shares seem destined to keep growing in value. That's just the way we humans are. Not many Warren Buffets around who buy out of favor stocks and hold on for as long as it takes for them to reach their potential.
2. Former share prices of less than $10 has kept some major brokerages from recommending this stock. When the stock stays above $10, we likely will see recommendations of InterDigital from major brokerages.
3. The loss of a patent infringement case against Motorola years ago soured brokers. Since then, the Supreme Court has changed the rules (Markman decision) for such litigation. Under the new rules, InterDigital probably would have won easily. See: "Learning from the 1995 Motorola Case
4. Until former president William Doyle resigned in October, InterDigital management lacked either the interest in or the charisma to "sell" the company to Wall Street, even though management could obviously sell its technology to the scientists at a giant like Nokia. (Scientists are a different breed than brokers.) A search for a "fire in the belly" CEO is underway with expectations that the post will be filled shortly after year end 1999.
5. Its not easy for an investor without technical training to understand the engineering breakthroughs IDC has accomplished. But the media is beginning the education process with front page stories in daily newspapers mentioning "new third generation standards", "wideband CDMA" and other important wireless terms. (See: "Telecom Technology for Non-Techies" for a beginner's level introduction to telecommunications technology.)
For investors seeking to enter the rapidly expanding wideband wireless technology area, InterDigital is one of very few "ground floor" investment opportunities still remaining. Like some other small caps – its value is just now starting to be recognized by the investment community. At a price of $4-$6 per share, IDC's current trailing price to earning ratio (PE) is a modest 6 or so, while larger, more widely followed companies are now sporting PE's of 40 - 80 or even 300 or 400. Added bonus: (1) IDC reported huge earnings for the 1998-2Q99 period, (2) a mountain of cash is in the bank, and (3) IDC has major tax credits to offset future taxable earnings. On Aug. 5, 1999 the only brokerage analyst who reports on InterDigital (Morgan-Keegan's Kasargard) raised his earnings estimate for 1999 by 84%, from $0.25 to $0.46 per share. (See: "Earnings", "Third Generation Standards for Wireless," "Risk-Reward Ratio", "Liquidity", "Earnings Risks", "Learning from the 1995 Motorola Case)
Teflon |
