From my national newsletter, The Prudent Speculator, which came out after the market close on 4/6/98:
We have tailored this feature to subscribers seeking a single investment idea and investors who are utilizing a system of dollar-cost averaging, allotting a fixed amount of money each month for stock purchases. The latter has proven to be an excellent strategy as the ups and downs of the market are smoothed by buying more shares when stocks are low and fewer shares when they are high.
Quick, name a stock that trades for 1.3 times book value, 7.5 times current operating earnings and 6.3 times cash flow while returning 17% on equity! Would it help if we also mentioned that the company has recently bought back 263,000 of its shares and plans to repurchase another 737,000 shares (over 6% of its outstanding common stock) over the next three months due to a strong balance sheet with $9.13 a share in cash and no longterm debt? If we added the fact that it completed a rights offering late last year that netted $47.7 million and it just instituted a quarterly dividend policy of $.07 a share, up from a $.10 annual dividend, many readers might respond with Nam Tai Electronics (NTAIF - $16.75), April's Stock of the Month.
Nam Tai is an independent provider of high quality manufacturing services to original equipment manufacturers of consumer electronics such as Texas Instruments (TXN - $57.00), Sharp and Seiko. Through manufacturing facilities in Shenzen, China, Nam Tai produces electronic calculators (52% of '97 sales), personal organizers & linguistic products (25%), and other electronic components, subassemblies & integrated circuits (22%). Despite the "Asian Contagion," Nam Tai reported on 3/16 record operating earnings of $2.27 a share for '97 on a 23% increase in annual revenues. Including non-recurring items like the sale of property in Hong Kong and Canada and a gain on sale of investments, actual earnings soared to $3.68 per share.
While the company concedes that "given the worldwide economic turmoil, a certain reduction in existing sales in '98 is possible" and that the issuance of 3 million extra shares, due to the rights offering, will dilute per share profits, operating earnings of $1.50 to $1.75 are likely in '98. With it poised to tap a portion of its $102 million cash hoard to make strategic acquisitions and investments in Asia at bargain prices, we would now buy NTAIF up to $21.60 for those who can tolerate the political, legal and economic uncertainties of doing business in China. Subscribers might also wish to consider the Nam Tai Warrants (NTAWF - $3.44).
The Goal Price Range is $43. |
