From the Samdisk thread via Clean86 - some tech value stocks
This Article from my Broker this morning:
5 insanely cheap tech stocks
12:01a ET March 30, 2011 (MarketWatch)
BLOOMINGTON, Ill. (MarketWatch) -- Recently, I've been talking about the values presented in the tech sector and highlighting companies that show a compelling valuation matrix or exhibit significant underperformance versus the broader Nasdaq.
Sometimes the market hides the best values in plain sight. This point becomes even clearer if one looks at a few of these names in succession.
Sandisk Corp.
While not showing significant underperformance versus the Nasdaq, SanDisk is still trading at just a shade over two times net cash (and investments). Given the strength in hand-held and ever-shrinking form factor devices, end markets should continue to grow for some time. Moreover, substantial growth exists as SSD pricing continues to decline and reach broad acceptance in consumer as well as enterprise markets. At a forward PE of 10 this stock seems quite cheap. However, after considering net cash, that ratio is actually just 5 and this is simply stunning, and thus makes my "insanely cheap" list.
Cisco Systems Inc.
Cisco has been one of my favorite networking plays since the much-ballyhooed guidance given last quarter. I keep hearing that Juniper Networks is "eating Cisco's lunch," yet only the stock price performance is. Frankly, this statement sounds good but isn't totally correct. If anything it's seeing the most share loss to Alcatel-Lucent , which interestingly enough has seen huge gains in IP edge routing (as has Juniper).
The issue is that this is a fragmented market with many product transitions and long testing lead times in the high-end segment where Cisco is strongest. Juniper itself is benefiting from a strong product cycle and the fact that it doesn't have dominant positions in the two currently lower growth areas in networking spend -- those areas being government and the very largest enterprise clients. And Cisco does dominate these two segments with its core routers and I expect the CRS-3 to ramp materially and have these two segments rebounding.
Cisco never quit investing during the "lean" years and I feel the market is mispricing the growth it does have, and any resumption of stronger top line growth as well, as ever-present cash flow generation.
Lastly, the fact the stock is selling at a forward multiple of just 8 times less net cash/investments and selling at one of the cheapest price/sales ratio in the company's history makes the valuation ultra compelling.
Intel Corp.
Intel trades right around 4.5 times net cash and investments, and while many say that Intel has no growth, I would contend they are not looking in the right places. Net cash has grown over 50% in two years. Total revenues have bounced back 36% as well in that time. Forward growth is likely lower than some names on this list, but I contend this company can continue to grow its financial value faster than many other companies. In the meantime, the stock is shelling out a 3.5% dividend yield and aggressively investing in both research and development and mergers and acquisitions. Lastly, it isn't as if the stock is priced for a lot of growth selling at just 7.2 times forward estimates (which may be conservative) after backing out cash. Not that it needs another reason to make this list, but relative to the Nasdaq , Intel has trailed performance by 23% in the last year.
Microsoft Corp.
The difference here with Mr. Softie (versus Intel and Cisco) is that it has actually had some potentially powerful catalysts show themselves of late. The Kinect sales are simply amazing. People like me talk about Apple Inc.'s iPads, and Android phones but these product sales are just as stunning.
Moreover, Bing has to be beating expectations and becoming a real player in global search. In fact, Bing has been strong enough so that I've moved more bullish on Microsoft due to this fact. I've long penned about the potential of enterprise share over the long haul from the coming Chrome OS, Docs and cloud-based solutions but I believe I'm very early on this thesis and feel this won't materially impact Microsoft for at least another 18 to 24 months if even that soon. For its part, Microsoft has traded cheaply for years but the recent valuation metrics have become almost insanely cheap. Current PE is 10.9, Forward at 9.2, less net cash it's just stunning in the low 7's and a PSR at just 3.2 times on a company with 40% operating margins. and
Marvell Technology Group
I'm finding Marvell now to be one of the cheapest names to be operating in and around the higher growth areas of the semi space. The fact that Marvell is actually trading under 3.5 times net cash makes it compelling in its own right. However, considering that this has been one of the more innovative chip companies with a superior history of translating design wins into real revenues (plus well-timed M&A), it's even more surprising.
Much has been made of the heavy reliance to the HDD space while ignoring many of the other positives contained in Marvell's story. The potential in the China smartphone segment and networking chips alone should be enough to alleviate any concentration concerns.
Bottom line, Marvell is as cheap on a net cash basis as it's been other than the 2008 2009 extreme lows. This is even more pronounced considering the new product introduction path on the name with as much growth potential since the post 2003/04 period, if not in the company's history. Case in point is the company's P/E just under 12, the forward at 9.4 and the forward less cash is a mind boggling 6.1 times.
In other news, I am closing out GSI Commerce at $29.18 for a gain of 30.27% after the merger bid from eBay Inc. I'm hearkening back to CommScope, as once again the buyer looks to be getting a good deal in my view.
I think there is significant potential for many more deals in the small and mid cap tech space. Names like Tekelec, Marvell, and even a Meru Networks Inc. could be in play.
Sean Udall is the author of TechStrat Report |
