18 stocks analyzed: Transcript from today’s chat…
Q: Cody, I remember you writing some time ago on MarketWatch that Intel will go to the moon, recommending investing into it. Why don’t you have INTC in your portfolio?A: INTC – With nearly $20 billion in net cash on the balance sheet and the company going to earn $2.50 next year, it’s very, very cheap. As I’ve written before though, it’s a matter of timing. The next few quarters could be problematic for the company as the PC business continues to face secular decline from tablet/smartphone substitution. But in two or three years, I’d expect Intel to have a huge chunk of that very tablet/smartphone component business, so there’s upside longer-term. I’d be a gentle buyer near anytime it’s near $20 with the understanding that it’ll likely take two or three years to get any return on that investment. Rev Inv rating: 8/10
Q: What do you think of TQNT? Thank you for the amazingly incisive, straight-to-the-point, no b.s. assessments. Outstanding.A: TQNT gets no respect. The stock barely beats the “penny stock” criteria (most traditionalists would consider any stock trading for less than $5 a share is consider a penny stock) and is trading at less than 8x next year’s earnings estimates or less than 6x earnings if you include the $2 net cash per share. The problem with the company is that it’s a commoditized, lower-margin chip that the company sells and competition is tough. Because it’s so cheap though, I do like it under $6 a share. TQNT Rev Inv rating: 6/10
Q: How about OVTI? Thanks! you saved my portfolio from mass destruction over the last few months. Damn good calls! Damn good service. I would be broke without you.A: OVTI – How cheap can a growth stock get? At less than 7x next year’s earnings estimates, this stock is very cheap and it’s a company that’s expected to grow topline 10% this year and next. The reason the stock is so cheap is because estimates have been scaled down relentlessly in the last three months as inventories in the chain got overfilled. And consumer spending trends have been worrisome too, though smartphones with cameras will continue to sell strongly. But see, there’s the other issue with this one — even the old handsets that people are trading in for smartphones had the camera modules that OVTI is selling in them already, so it’s not as pure a growth play on the smartphone trend as some others like CY and GLW are. Rev Inv rating is 5/10
Q: Hey Cody, enjoying the subscription. Any insights on LVLT?A: LVLT – I have a special place in my heart for this company because Jim Crowe the CEO was one of the first CEOs I ever met when I moved to NYC back in the late 1990s. And it does look like his vision for this company as the largest Internet backbone services provider in the world is finally going to work out now that he’s the last company standing in the major consolidation that had to take place for anybody to ever have a chance of actually growing earnings in that business. The balance sheet’s always been wrecked with tons of debt and not enough cash, but I think the financials will work out and this stock won’t be a penny stock five years from today. Rev Inv rating: 6/10
Q: Cody what do you think about DELL, is it a good long?A: DELL – At $14 and $4 in net cash per share and $2 per share in earnings, it’s another down and out cheapie tech stock. But have ever seen Dell succeed in selling anything but PCs? And do you really think PCs are ever going to be a growth industry again now that tablets and smartphones do more than a PC did just a few years ago? Dell’s too cheap to hate or short, but it’s a pure cyclical play these days and will likely be forever. Rev Inv rating: 4/10
Q: Cody, do you like OCLR?A: OCLR – another newly-minted tech penny stock. The company sells components against competitors like JDSU and they all had so much overcapacity back in the late 1990s that they’re still slugging it out trying to rightsize their ships. At less than $5 and with $2 per share net cash per share, this is another one I like just because it’s so down and out cheap. If they can actually earn 25 cents or more next year, this stock will be closer to $10 a share but I’d expect it to struggle to ever get much above that recent $18 a share high it saw late last year. Rev Inv rating: 6/10
Q: Any view on FFIV?A: FFIV is one of the highest-profile tech stocks on the planet. While people consider FFIV’s competition to be Riverbed and Cisco, some networks are built using all three company’s products. Saving costs and expanding fuctionality of existing bandwidth is a great proposition for most tech purchasing managers and FFIV will likely continue to see growth for many years to come. It’s not cheap at nearly 20x next year’s earnings but it does look cheaper when you consider the net cash on the balance sheet of $10 per share. Rev Inv rating: 8/10
Q: What are your thoughts on Netflix? There has been a very high short % of float going back at least a year, and yet the company keeps performing. Do you think this will continue considering their pricing change and losing Starz’ library?A: NFLX – under assault from it’s suppliers (Starz and other content providers are rebelling), competitors (Amazon, Apple and even YouTube etc are all ramping up services) and spending like crazy to expand in new markets around the world…NFLX has lost the confidence of many investors of late. But the company’s become the de facto standard of Hollywood video watching on the Net and the iPad and that’s going to help fuel much more growth over time. There’s not a lot of cash for the company to work with so they’ve got to execute perfectly. That raises the risks. Rev Inv rating 6/10
Q: Cody, What are your thoughts on SWKS? They are very similar to MRVL and NETL.A: SWKS – Another supplier into the cellphone industry. The bull story for SWKS is that it can charge more for essentially the same components that it sold into the old-fashioned mobile handsets when it sells them to smartphone companies. That helps fuel growth, especially on the bottom line as that boosted cost goes straight to earnings. At $20 a share with $2 a share in net cash and $2 per share in earnings next year, it’s just not cheap enough to get me excited. Rev Inv rating: 5/10
Q: Cody, what are your thoughts on Cree?A: CREE – As LED lights become ever more mainstream, CREE’s going to see big growth ahead. CREE’s technologies are vying to become de facto industry standards and if they can pull that off, I expect they’ll be taken out for a nice premium sometime in the next two or three years. The stock’s not outrageously expensive if you consider the nearly $8 per share net cash as the company has a lot of visibility in its demand, making that $1.95 estimate for next year more likely than the jump from $1.45 would otherwise seem to indicate. Rev Inv rating: 7/10
Q: How about Edwards Lifesciences (EW)?A: EW – I had to look up what that symbol stood for. I answered every other question so far almost off the top of my head other than checking some of those numbers though even those I had mostly memorized after all these years of trading stocks. So regarding EW: “Edwards Lifesciences Corporation offers products and technologies designed to treat advanced cardiovascular disease worldwide. It provides products for heart valve therapy; critical care; cardiac surgery systems; and vascular diseases. The company manufactures tissue heart valves and repair products, which are used to replace or repair a patient’s diseased or defective heart valve; and produces pericardial and porcine valves from biologically inert animal tissue sewn onto proprietary wire form stents. It offers hemodynamic monitoring systems used to measure a patient’s heart…” I know enough to know I have no edge analyzing that stock. Sorry, I can’t help you on EW.
Q: Any thoughts on HLIT? Cody’s writing and philosophy is really one of the best things about this advisory service. plus cody’s a great writer. and yeah his buy/sell rocks too.A: HLIT – The company seems to be in the right positioning and the right industry — helping video play on new networks. But the growth and execution have been lacking there since as long as I’ve followed this stock. At $5 a share with $1 per share net cash and with earnings expected to grow from 40 cents to 50 cents in the next year, it’s pretty cheap. But I can’t get comfy with a long-term vision for this one. Rev Inv rating 3/10.
Q: How about COGO?A: COGO – if you believe this Chinese company’s financials, it’s very tempting. The stock trades for less than 5x next year’s earnings estimate and they supposedly sell all the right components for tablets, smartphones and every other growth industry on the tech planet. I have yet to see a small cap tech stock from China work out for investors. I don’t think this one will either. Rev Inv rating: 2/10
Q: AKAM looks like a buy. What do you think? I am ready to pull the trigger. Thanks!A: AKAM – It’s certainly in the right spot, with a proprietary network of servers and switches near end-users of the Internet around the developed world. The Internet would likely run noticeably slower if Akamai didn’t exist. And that’s saying something. At $22 a share and with nearly $3 per share in net cash, the stock’s trading at 12x this year’s earnings and at about 10x current estimates for next year. I think those estimates are too low although pricing pressure has been crimping topline growth of late for these content delivery companies. But at $22 a share, the long-term outlook for this stock is very bright. Rev Inv rating: 7/10
Q: Cody, how about GLUU?A: GLUU – a penny stock that’s not expected to earn any money this year or next and with $12 million total on their balance sheet. It’s a lottery ticket at best. Rev Inv rating: 2/10
Q: Can you analyse INFY for me? It’s the biggest IT stock in India.A: INFY – If you believe that corporate America will continue to get huge tax benefits by laying off Americans and hiring supposed replacements in India for the next ten years, then INFY might be for you. If, on the other hand, you’ve ever dealt with outsourced services to India as a supplier (I’ve hired Indian programmers over the years to help me build websites…never have had a good experience or a product that they’ve built even come to market) or as a consumer (I get paid randomly late if at all by some of the biggest companies I write for and every time I ask “what the hell?” they say, “Payroll and accounts receivable is outsourced to India” and that’s the entire explanation) then you probably should think twice about betting on such outsourcing trends being sustainable. Rev Inv rating: 2/10
Q: What about KITD?A: KITD – Is a better version, but not by much of HLIT. The company sells into what should be an incredibly high growth market – “It offers KIT platform for managing Internet protocol (IP)-based video assets across the browser, mobile device, and IPTV set-top box enabled television sets.” And likewise, hits on all the right catchphrases “Our platforms”. But the company just doesn’t deliver the sustainable growth I’d expect. If they actually earn the 87 cents that analysts are expecting for next year the stock might act all right. But color me skeptical on this one. Rev Inv rating: 3/10
Q: What do you think of MU?A: MU – Micron’s technologies experienced huge growth along with the entire PC industry back in the late 1980s and 1990s. But as PC growth has stagnated and as tablets/smartphones start to take more marketshare from PCs, Micron’s going to struggle to maintain margins. The company does benefit from tablet/smartphone growth, but any exposure to those industries is more than offset by the pricing pressure and losses in the PC sector. The balance sheet’s not as good as it could be with a billion in debt to go with the couple billion in cash. Rev Inv rating: 4/10
Ok guys, that’s it for today. You can imagine my brain’s mushy now after analyzing all those stocks. See you back here next week for a normal chat where you can ask me anything and I’ll answer it. Thanks for reading, thanks for asking about all these stocks and thanks for subscribing!
