IOM at 24???
Hi, everyone! Weird to see the same names still here 5 years later!
RealMoney.com : Merchant of Value
Big Tech Names Still Look Expensive
By Glenn Curtis
Columnist
05/08/2002 12:25 PM EDT
With Cisco's (CSCO:Nasdaq - news - commentary - research - analysis) solid quarter last night touching off a huge tech-stock rally today, lots of readers are emailing me to ask if the big tech names are good value plays. But with a few exceptions I still have to say no.
The thing is that Cisco didn't say anything that suggests sales and earnings are going to start picking up sectorwide in the foreseeable future. And there's no ignoring that these stocks still look expensive, even after big selloffs in recent weeks. That goes for Oracle (ORCL:Nasdaq - news - commentary - research - analysis) and Sun Microsystems (SUNW:Nasdaq - news - commentary - research - analysis) and all the rest.
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These stocks continue to trade at sky-high sales and earnings multiples, which means there's still plenty of risk. Obviously, as a value investor you're trying to minimize risk, and you just can't do that right now with the big tech stocks. Let's take a look at some numbers.
Even in the single digits, Oracle trades at a whopping 7.5 times book value, 4.7 times sales and more than 20 times 2002 earnings estimates. Sun Micro trades at more than 2 times book, 1.5 times sales and 36 times 2003 earnings forecasts. Cisco, 20% runup or not, trades at a lofty 3.4 times book, 5.4 times sales and 48 times its 2002 estimate.
Make no mistake, in no way am I saying these stocks can't go higher. But their downside potential is still significant, so I'm steering clear.
Instead, I'm looking at names like Advanced Micro Devices (AMD:NYSE - news - commentary - research - analysis). At around $11, the stock trades just above 1 times sales and 1 times book, and the company is expected to grow something like 15% a year in the coming five years. Another one I'm liking more and more is JDS Uniphase (JDSU:Nasdaq - news - commentary - research - analysis). Sure, the demand for fiber is a bit sketchy right now. But with essentially no long-term debt and more than $1 a share in cash, at $4 this stock is getting kind of hard to ignore.
Last, take a gander at Iomega (IOM:NYSE - news - commentary - research - analysis). It's showing some really solid margin improvement -- plus the company has no long-term debt and trades at 0.81 times sales. If it could only find a way to gas up its revenue line, I think the stock could double from the recent $12. |
