WR--You appear to be looking for undervalued companies with low downside risk--a reasonable objective, though somewhat subject to economic conditions and investor sentiment. I suggest you consider (among tech stocks) the following:
QUALCOMM, owns most of the key patents for advanced cellular phone technology, generates positive cash flow, but is hampered by European companies and regulators pushing to keep an older technology in place. Most of their patents are carried on the books at zero value.
Touch America (TAA), the company that was formed after the sale of all the energy assets of Montana Power, emerges as a long distance data and voice transmission company with a 26,000 mile fiber optic network and NO DEBT WHATSOEVER (the only company without debt in this area). It has a book value of about $11 per share and current stock price below $2.50, but does not expect to be cash flow positive until later this year.
LEAP WIRELESS (LWIN), the most efficient, lowest cost provider of cell phone services in 40 select markets. By charging a flat monthly fee for unlimited local calls, plus 8 cents a minute (prepaid) for long distance, the company has positioned itself as a logical and economical substitute for wired phones in each of its 40 markets (cities such as Albuquerque, Denver, Salt Lake City, Chattanooga, Syracuse, Buffalo, etc.). Thus, its potential subscriber base is larger than that for companies offering conventional, time limited service. The book value of the shares is about five times current stock price. Why? Because investment analysts think they see another WorldCom hiding in the bushes.
Corning (GLW), the former maker of Pyrex and kitchen ware is now exclusively into three businesses. Fiber optic lines and components is the biggest part, and is depressed. But the stock price of about $3.50 is less than book value and reflects a sentiment among investors that fiber optics is the ONLY business Corning is involved in. The two other businesses, flat panel displays and ceramic substrates for catalytic converters, are both doing quite well. Corning has a proprietary process for making very thin glass sheets up to about 48 inches, without any blemishes, a requirement for LCD displays now becoming more frequently used in desktop computers and TV sets equipped for HDTV. If fiber optics were Corning's only business, then the stock would be appropriately priced. But the cash flow generated by its other businesses means that its debt is manageable and leaves it in a much better financial position than its principal competitor, Lucent.
These are just three examples of value in a sector that is one of the most depressed I've seen in the last 20 years.
Art |
