never should have invested a dime...
SanDisk differs from other companies in the NAND flash business, and also from most tech sector companies in the following respects:
1. The company still makes money on its manufacturing and royalty revenues.
2. The company has virtually no debt on its balance sheet.
3. The company has a better cash position than most or all of its competitors.
4. Excluding the intrinsic value of its patents (which for the most part is not on the balance sheet), the book value of the company is well above the current share price.
Share prices for numerous technology stocks reflect what analysts THINK about the group, rather than the inherent strengths and weaknesses in the individual companies. In other sectors, which tend to be understood better by the typical stock analysts with their accounting/business backgrounds, stock prices tend to reflect company fundamentals over the long term. Tech stocks in general are exceptions to the rule because too many analysts don't understand the nature of the business.
As anyone can see from recent investment firm recommendations, the analysts still lump the entire semiconductor group together. An example is John Dvorak's recent article on the book to bill ratio, still less than one. That means for the entire sector, shipments in dollar value are still greater than new orders -- a condition suggesting a slump. But I would bet that if the sector were broken down by types of semiconductors, the book to bill ratio on NAND flash would still be above one, while the ratio for other semiconductors -- microprocessors, set top box, TV, and other semiconductor components -- would be well below one.
All of this doesn't mean SNDK shares will go up in the near future, since that is a function of how the major market influences (i.e., institutional investors) see the stock's potential. But if you are a long term buy and hold investor, as I am, then you can be comforted by the fact that book value per share still keeps on increasing. That is to say, the intrinsic value of the stock, even though not reflected in market price, keeps on increasing.
Art |
