Update to Jubak's Picks
Sell Garmin (GRMN, news, msgs). I'm selling Garmin into the strength of the current technology rally. Garmin's shares haven't participated in this rally as strongly as I'd like because of worries about how shifts in the personal-navigation-device market might be hurting margins at Garmin.
This year's just-concluded Consumer Electronics Show in Las Vegas was rife with new low-cost but high-quality devices from new vendors. From preliminary holiday sales, numbers it looks like sales of high-end personal-navigation devices came on strong (good news for Garmin) but that at the low end these new vendors used very aggressive discounting in an attempt to build sales (bad news for Garmin).
Garmin and other higher-priced vendors, such as TomTom (TMOAF, news, msgs), defended their share at lower price points by extending discount periods and cutting prices further. TomTom, for example, increased its lower-end discounts by an additional $50 a device. This can't help profit margins and increases the possibility that Garmin will announce great unit sales but profit-margin pressure for the past quarter and going forward when the company reports earnings Feb. 14.
As of Jan. 16, I'm selling Garmin out of Jubak's Picks with a 3.24% gain since I added the stock to the portfolio Oct. 12. (Full disclosure: I will sell my personal shares of Garmin three days after this column is posted.)
Buy SiRF Technology Holdings (SIRF, news, msgs). The bad news for high-end personal-navigation-device companies such as Garmin and TomTom is good news for GPS chip maker SiRF Technology. The company was clearly the preferred chip supplier for low-end vendors in the personal-navigation-device market at the Consumer Electronics Show and in the next generation of wireless handsets with GPS capability.
The stock has had tough going in 2006 on worries that the company was losing some of its estimated 80% to 90% market share. The company has indeed lost share, as is almost inevitable these days in any fast-growing and profitable technology sector, but even with a drop to 60% to 70% market share in 2007, as projected by Deutsche Bank, SiRF Technology should see its chip sales climb in 2007 as the personal-navigation-device market goes from 16 million units in 2006 to between 24 million and 30 million in 2007. I'm adding the shares to Jubak's Picks with a target price of $34.50 by September 2007.
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