Brian, I am still wondering about Corning. At a P/S of about 1.25 on what could be near trough level sales it looks very cheap. However, have investors confused the fiber optic cable industry with the semiconductor industry? In semis, Moore's law means that new chips are way better than old ones, and semiconductor stocks have performed incredibly well for a long time.
I have heard the argument that the whole world's fiber optic traffic could in theory be sent down a single strand of fiber by splitting the light into a huge number of wavelengths. That would not be practical of course, but I think it shows how different this market is for fiber optic cable. As far as I know, this product does not wear out, and the equipment that it is connected to keeps improving, resulting in less need for fiber upgrade. Also it is not that expensive to produce fiber optic cable, so what is to prevent other companies from entering this space over time when demand picks up? Is this a commodity product?
Maybe some thread members have the answers to these questions. The experts were totally wrong about GLW before, and perhaps they are wrong now and it is a fantastic buy here. I just don't know. Also, insiders have been buying, which is of course a good sign. A Motely fool article a while back suggested GLW could run out of cash in a year, perhaps that is another concern if the downturn lasts a lot longer than expected. Regarding management knowing what they are doing, I hope so, but that 5 billion dollar purchase they made last year does not seem very smart at this point.
I don't think this is a stock that goes down a lot from here, so the main question I have at this point is does it go up. I am long GLW, but sold most in September to buy into stocks like JNPR, QLGC, and CIEN that have performed much better short term. I have a slightly larger position in NEWP, which I think will have better upside when this industry comes back. But maybe GLW will get a great bounce when a flood of orders come at some point. If that happens, however, I will probably be looking to exit the stock as I just don't see right now how GLW is going to be a great performer on a long term basis.
Best wishes to all.
John |
