I’ve got a new long I am adding today…

Good morning and welcome back to the house called Wall Street.   It’s a strong rally to host us this morning, and the breadth is strong across the board.  I’ve got a new long I am adding today, Sandisk.   Here’s the analysis:


SanDisk Corporation designs, develops, manufactures and sells flash storage card products used in various consumer electronic products.

Balance Sheet

Cash and Cash Equivalents: 975M

Short Term Investments: 2.0B

Long term Investments: 4.3 B

Total Cash: 4.5 B

Total Debt: 1.7B

Net Cash: 2.8 B

Outstanding Shares: 238 M

Net Cash / Share: 12

Share Price: 42.24

Enterprise Value / Share: 30.24

Total Market Cap: 10.1 B

Enterprise Value: 7.4 B

2012 Sales Growth: 44.2%

2012 Earnings Estimate: 6.30

Enterprise Value Multiple: 5 Times Forward Earnings

Dividend & Yield: N/A

Source: Yahoo Finance, MarketWatch, Willard Media Ventures

This company has really added the cash from good ol’ profits in the last decade. And that’s really one of the remarkable stories here at Sandisk — the impressive balance sheet. We’re talking about $15 per share in net cash — more than a third of the stock’s market cap. With Apple AAPL +1.47% using flash memory in just about every mobile product they make these days, including the MacAir, Sandisk and the other flash players are scrambling to add capacity.

When Samsung went after Sandisk with a hostile bid in September 2008, many on Wall Street assumed its fate to be sealed. After all, the Korean conglomerate was offering a 73% premium just days after Lehman Brothers failed and all risk-taking had gone out the door. But Sandisk’s management held out for more money and talks were scuttled. Today, SNDK’s stock has nearly doubled from Samsung’s offer, as its flash memory business has come roaring back alongside the mobile market. It’s top-line growth in 2012 is projected north of 40%, which means its $12 a share in cash should be even higher this time next year.

The growth in the tablet market necessitates Sandisk’s products, consumers running apps and streaming video just won’t tolerate lag times. I want Sandisk to keep building capacity in its product pipeline to take advantage of manufacturers demanding more flash memory than ever.

I’m adding Sandisk to the portfolio today.

Meanwhile, I’m basically letting go of Celestica entirely.  We’ve already got so much exposure to the companies like Marvell and Cypress that supply components to the very same customers that Celestica builds gadgets for that, by adding Sandisk to the mix, we’d have too much exposure and not enough diversification in the portfolio. Celestica’s a great company and likely headed higher too, but the upside potential for Sandisk and some of these others is probably even better.  I sold off Celestica common stock last week, as you might recall.   I’ll hold onto the closer dated calls because there’s just not enough value in them to sell.