Barrons on 3COM
some comments in this weeks Barron's regarding 3Com ..........
"About 15 months ago, we introduced the Cash Rich Tech Stock Index (CRTS), a composite of 15 small tech companies, mostly based on the West Coast, that were flush with cash (Plugged In, Oct. 28, 2002). The index was the brainchild of B. Riley & Co., a small-cap research boutique and trading outfit in Santa Monica, Calif."
"It appears to have been a good call. As of Jan. 23, the CRTS closed at 561, up 461% from the base of 100 at its inception on Oct. 15, 2002. That compares to about a 65% increase for the Russell 2000 and 66% pop for the Nasdaq Composite during the same time period."
"Now, Riley is concerned that most of the stocks that comprise the CRTS are way ahead of themselves, suggesting that it might be time to close the curtain on the opportunistic index. Riley has taken most of his firm's money off of the table, reducing its position in CRTS stocks by 80%."
"3Com, which is another original member of CRTS, remains in the index today. The stock started at $4.05 when the company had $3.49 in net cash per share and was generating still more. B. Riley picked the company believing that its days of heavy cash consumption and declining revenue were over. What's more, the firm figured that its strong brand name and reasonably broad product portfolio would eventually result in a profitable business.
Since the launch of the index, 3Com increased its cash reserves, sold its telecom business and formed a joint-venture with China-based Huawei Technologies, Riley points out. The company remains in the index because its cash equals more than one-third of its market valuation. "We think it has one of the most attractive valuations in the networking industry and has more to gain in terms of market share and margin expansion than much of the competition," Bryant Riley says." |
