Interesting article today...
Five Double-Your-Money Tech Survivors
By Jim Jubak
MSN Money Markets Editor
10/5/2005 7:09 AM EDT
URL: thestreet.com
Companies such as Lucent Technologies (LU:NYSE) , JDSU (JDSU:Nasdaq) and Vitesse Semiconductor (VTSS:Nasdaq) -- all still-struggling survivors of the great tech wreck of 2000 -- have turned so many corners their stocks should be on wheels.
Over the last five years and counting, each pickup in sales has been a momentary blip followed by another collapse in growth. Each reorganization has promised a return to black ink from red, but each has been followed by another wave of cost-cutting as revenue continued to decline.
So it's with trepidation that I say this, but right now I think the stocks of five of these companies, each selling for way less than $5, are solid speculative buys.
They're cheap. They'll soon have the wind of the end-of-the-year technology rally at their backs. And -- here's the wild part -- I think there are signs of real and sustainable improvement.
These stocks aren't for the weak of heart, and remember, a $3 stock can still cost you half your money if it drops to $1.50. But balancing that risk, I think investors stand a reasonable chance at getting a double out of these five stocks by year-end.
The stocks? Lucent Technologies, JDSU, Vitesse Semiconductor, Conexant Systems (CNXT:Nasdaq) and Anadigics (ANAD:Nasdaq) .
Lucent Technologies
I listed Lucent Technologies first, not because it's my top pick of these five, but because it illustrates what an investor is looking for in a $5 technology stock. First, Lucent's chart clearly shows the kind of base-building that an investor likes to see before buying. The shares hit a 52-week high of $4.16 back in November 2004 and a low in April 2005 at $2.35. But investors who are buying now have the comfort of the solid base the stock has built at roughly $3 a share.
Positive news has started to emerge in the telecommunications technology sector in the last quarter or two. In the second quarter, capital spending by U.S. carriers came in above Wall Street expectations as the largest of what used to be called the regional Bells, Verizon Communications (VZ:NYSE) , BellSouth (BLS:NYSE) and SBC Communications (SBC:NYSE) , raised their spending on wireline phone equipment. Three of the five largest cellular providers spent more as well.
Legg Mason now forecasts that capital spending will total $12.8 billion for the third quarter and $50.6 billion for all of 2005. The increase is especially promising because communications capital spending almost always grows faster -- and at a more rapid rate than Wall Street expects -- in the second half of the year.
Besides such general growth in a company's addressable market, I'd like to see growth in the specific segments that the company has targeted with its products. So, for example, it's good news for Lucent that Sprint Nextel (S:NYSE) has announced that it will increase its capital spending for 2005 to $5.6 billion from $5.4 billion and set its 2006 budget at $6 billion.
Lucent, along with Nortel Networks (NT:NYSE) , is a major supplier of infrastructure for Sprint's wireless network. About 70% of Lucent's recent sales come from wireless equipment and services, and the company has built up a 50% share of the third-generation wireless capital spending commitments made by U.S. wireless companies... <snip> |
