Wealth Manager has obtained a draft of the amendment. It mandates the extension of the fiduciary standard as it applies to investment advisors under the Investment Advisers Act of 1940, to broker/dealers who provide, "personalized investment advice about securities to a retail customer (and such other customers as the Commission may by rule provide)..."
It calls for the SEC to write rules:
"to provide that, with respect to a broker or dealer, when providing personalized investment advice about securities to a retail customer (and such other customers as the Commission may by rule provide), the standard of conduct for such broker or dealer with respect to such customer shall be the same as the standard of conduct applicable to an investment adviser under section 211 of the Investment Advisers Act of 1940.
The receipt of compensation based on commission or other standard compensation for the sale of securities shall not, in and of itself, be considered a violation of such standard applied to a broker or dealer. Nothing in this section shall require a broker or dealer or registered representative to have a continuing duty of care or loyalty to the customer after providing personalized investment advice about securities."
The amendment also calls for additional authority for the SEC to:
* require broker/dealers to disclose the "range of products offered"
* prohibit or restrict "certain sales practices, conflicts of interest, and compensation schemes for brokers, dealers, and investment advisers that the Commission deems contrary to the public interest and the protection of investors."
* enforce "violations" of these rules with broker/dealers.
It also requires that advice givers:
* "act in the best interest of the customer"
* that "any material conflicts of interest shall be disclosed"
* and that, "the Commission will facilitate the provision of simple and clear disclosures to investors regarding the terms of their relationships with brokers, dealers, and investment advisers, including any material conflicts of interest"
Comments? Please send them to kmcbride@wealthmanagerweb.com. Kate McBride is editor in chief of Wealth Manager and a member of The Committee for the Fiduciary Standard.
Showing posts with label best stocks to hold 2012. Show all posts
Showing posts with label best stocks to hold 2012. Show all posts
Thursday, March 29, 2012
Tuesday, March 27, 2012
Look Out Below! Patriot Coal (PCX) & VirnetX Holding (VHC) in Technical Trouble
There are really only two schools of thought in the world of stock-picking.... trade them based on what they should be doing, and trade them based on what they are doing. The former feels right, but it's the latter that tends to put the most money in your pocket. Enter VirnetX Holding Corporation (AMEX:VHC) and Patriot Coal Corporation (NYSE:PCX), stage right. Regardless of whatever pro/con arguments are being made for either, both PCX and VHC have dropped key technical hints that say the trading masses have their pitchforks and torches in hand.
Not that Patriot Coal Corporation was on the mend just yet, but after finding a floor at $6.86 last week for the third time since October, it was at least beginning to look like the bleeding stopped. Wrong. PCX has fallen 8.0% today, reaching $6.34 in the process and opening up a whole new door of bearish territory that up until now had been closed. And, given the way the 50-day and 100-day moving averages have been pressing down the whole time, it's not like there's a lot of hope for a quick fix now.
At the heart of the problem for PCX is falling coal prices. Coal prices have been sliding since early 2011, but the tumble started to reach 'in earnest' levels in January. Although coal's tumble may finally be coming to an end - thermal coal has been hovering $60-short ton since late January, and coking coal is getting in a groove around $200/tonne - it's down again today. Investors seem to be uninterested in waiting it out any longer with Patriot Coal Corporation simply because there's no end in sight for the slacking demand.
As for VirnetX Holding Corporation, a couple of months ago it looked like this pseudo-technology stock was ready to make a bullish run. We had just s! een VHC win a hard fought battle to get back above all of its key moving averages as well as a key resistance line. And, traders were getting excited about owning it again; the company had just been awarded a favorable ruling in a patent infringement case that stood to start generating some solid recurring revenue. Since then though, a reopening of the USPTO patent case has exposed this company's vulnerability in the mobile patent game.
To put it in technical trading terms, VHC has fallen back under all of its key moving averages, and back under that key ceiling at $24.09.... and it's still moving lower. We're also close to seeing a so-called 'death cross' of the 50-day moving average line (purple) under the 200-day moving average line (green), which would suggest the momentum for VirnetX Holding is bearish is multiple timeframes - the last thing any owner wants to see.
Not that Patriot Coal Corporation was on the mend just yet, but after finding a floor at $6.86 last week for the third time since October, it was at least beginning to look like the bleeding stopped. Wrong. PCX has fallen 8.0% today, reaching $6.34 in the process and opening up a whole new door of bearish territory that up until now had been closed. And, given the way the 50-day and 100-day moving averages have been pressing down the whole time, it's not like there's a lot of hope for a quick fix now.At the heart of the problem for PCX is falling coal prices. Coal prices have been sliding since early 2011, but the tumble started to reach 'in earnest' levels in January. Although coal's tumble may finally be coming to an end - thermal coal has been hovering $60-short ton since late January, and coking coal is getting in a groove around $200/tonne - it's down again today. Investors seem to be uninterested in waiting it out any longer with Patriot Coal Corporation simply because there's no end in sight for the slacking demand.
As for VirnetX Holding Corporation, a couple of months ago it looked like this pseudo-technology stock was ready to make a bullish run. We had just s! een VHC win a hard fought battle to get back above all of its key moving averages as well as a key resistance line. And, traders were getting excited about owning it again; the company had just been awarded a favorable ruling in a patent infringement case that stood to start generating some solid recurring revenue. Since then though, a reopening of the USPTO patent case has exposed this company's vulnerability in the mobile patent game.
To put it in technical trading terms, VHC has fallen back under all of its key moving averages, and back under that key ceiling at $24.09.... and it's still moving lower. We're also close to seeing a so-called 'death cross' of the 50-day moving average line (purple) under the 200-day moving average line (green), which would suggest the momentum for VirnetX Holding is bearish is multiple timeframes - the last thing any owner wants to see.
Wednesday, February 22, 2012
Recent pullback offers excellent opportunity to buy mining stock
Randgold Resources (NASDAQ:GOLD) — For months, gold bullion prices have been running ahead of the gold mining stocks. But miners forged ahead in Q3 as higher earnings from increasingly better bullion prices improved their outlook.
With that rise in the price of gold bullion, Randgold is estimated to increase revenues by 108% in 2011, and looks for an increase of 38% in 2012. Earnings are expected to rebound to $6.74 in 2012 from $3.52 in 2011, and S&P has a ��four-star buy�� on GOLD with a price target of $140 within 12 months.
Technically the pullback from $120 and the successful consolidation at $110 offers buyers an excellent opportunity to purchase this quality mining stock at a discounted price.
The trading target for GOLD is $120 with a longer-term projected target of $150, as the recent decision by the Fed to keep interest rates low until at least late 2014 is a boost to most commodities, including gold.
With that rise in the price of gold bullion, Randgold is estimated to increase revenues by 108% in 2011, and looks for an increase of 38% in 2012. Earnings are expected to rebound to $6.74 in 2012 from $3.52 in 2011, and S&P has a ��four-star buy�� on GOLD with a price target of $140 within 12 months.
Technically the pullback from $120 and the successful consolidation at $110 offers buyers an excellent opportunity to purchase this quality mining stock at a discounted price.
The trading target for GOLD is $120 with a longer-term projected target of $150, as the recent decision by the Fed to keep interest rates low until at least late 2014 is a boost to most commodities, including gold.
2 Stocks That Are Wasting Your Money
According to research conducted by Boston University finance professor Allen Michel, when a company announces it's buying back stock, that stock tends to outperform the market by about 2% to 4% more than it otherwise would have over the ensuing six months.
But multiple studies show that over the long term, buybacks actually destroy shareholder value. CNBC pundit Jim Cramer cites the example of big banks that bought back shares in 2007-2008 -- just before their stocks fell off a cliff. Far from being buy signals, Cramer calls buybacks "a false sign of health ... and often a waste of shareholders' money." Indeed, the Financial Times recently warned that "the implied returns over a period from buy-backs by big companies would have been laughed out of the boardroom if they had been proposed for investment in ... conventional projects."
So why run buybacks at all? According to FT, management can use them to goose per-share earnings, which helps CEOs earn bonuses based on "performance." Also, the investment banks that run buybacks for management earn income and fees from promoting buybacks. But you and me? We miss out on gains unless the purchase price is less than the actual intrinsic value of the shares.
And we're about to miss out again.
Two bad buybacks
StreetInsider.com keeps a running tally of which companies are buying back stock, and how much they're spending. SI is too polite to accuse companies of actually wasting shareholders' money, of course -- but I'm not. With SI's help, I've come up with two examples of popular stocks that I believe are squandering shareholder dollars on ill-timed buybacks... and one idea for how shareholders could do better.
Stryker (NYSE: SYK )
At first glance, surgical implants-maker Stryker seems a strange subject for an "anti-buyback" article. At 16 times earnings, the company carries a cheaper P/E than archrival Zimmer Holdi! ngs (NYSE: ZMH ) . Stryker's also growing faster, and pays a dividend, while Zimmer does not. While competitor Medtronic (NYSE: MDT ) -- and Zimmer, too -- is laden with debt, Stryker boasts a cash-rich balance sheet.
It's what Stryker intends to do with its cash that should concern investors. In October, you see, Stryker reduced estimates for revenue growth, yet at the same time promised to earn more than expected, upping its fiscal 2011 target to approximately $3.72 per share. With profit margins declining, hitting this new target may depend on reducing the share count, boosting per-share earnings.
Cue buyback. Earlier this month, Stryker announced it would boost its buyback plan by $500 million. With the growth rate still estimated at less than 11%, and free cash flow lagging reported net income, the shares don't look cheap enough that I'd buy them. Then again, I'm not on the hook for hitting an ill-considered profits promise. (Promise in haste, repent in leisure.)
JPMorgan Chase (NYSE: JPM )
Speaking of promises made in haste, did you hear that JPMorgan is increasing its buyback plan, too? It's true. With $8 billion in buybacks already authorized (and apparently spent) for this year, JP announced in December that it's upping its repurchase authorization by a further $950 million.
Good idea? JP's shares cost only seven times earnings, after all, and Wall Street has the stock pegged for 8% growth. That certainly looks cheap. The problem is that it may be "cheap for a reason." By now, you've no doubt heard about the troubles with European sovereign debt, the risk it may default... and the credit default swaps that banks like Bank of America (NYSE: BAC ) , Citigroup (NYSE: C ) , and JPMorgan could be o! n the ho ok for if default happens. Maybe the risk is overblown, maybe not. But until we're sure, JP might be better advised to keep a little extra cash on hand to deal with the risks -- not blow it all on another $0.95 billion worth of buybacks.
A better use of cash
Now, I don't want to end this column on a down note, and in fact, I have spotted one company out there that's spending its shareholders' money prudently. It's a name you probably know, seeing as I publicly recommended it just last week: Caterpillar (NYSE: CAT ) .
Doubling down on a program that's already rewarded shareholders richly, Caterpillar says that rather than allow its 2007 buyback program to expire as planned on Dec. 31, the company will extend it for another four years -- reopening a $3.75 billion war chest for opportunistic buys.
I think this is a great idea. At 14 times earnings, a strong 2% dividend yield, and a projected growth rate that tops 23%, the stock's already bargain-priced. If you ask me, this is one buyback program to bank on -- for Caterpillar, and for the investors who choose to buy it as well.
Looking for more great stock at "buyable" prices? You're in luck, because we've just found five of them. Read all about them in the Fool's new -- and free! -- report: "5 Stocks The Motley Fool Owns -- And You Should Too."
But multiple studies show that over the long term, buybacks actually destroy shareholder value. CNBC pundit Jim Cramer cites the example of big banks that bought back shares in 2007-2008 -- just before their stocks fell off a cliff. Far from being buy signals, Cramer calls buybacks "a false sign of health ... and often a waste of shareholders' money." Indeed, the Financial Times recently warned that "the implied returns over a period from buy-backs by big companies would have been laughed out of the boardroom if they had been proposed for investment in ... conventional projects."
So why run buybacks at all? According to FT, management can use them to goose per-share earnings, which helps CEOs earn bonuses based on "performance." Also, the investment banks that run buybacks for management earn income and fees from promoting buybacks. But you and me? We miss out on gains unless the purchase price is less than the actual intrinsic value of the shares.
And we're about to miss out again.
Two bad buybacks
StreetInsider.com keeps a running tally of which companies are buying back stock, and how much they're spending. SI is too polite to accuse companies of actually wasting shareholders' money, of course -- but I'm not. With SI's help, I've come up with two examples of popular stocks that I believe are squandering shareholder dollars on ill-timed buybacks... and one idea for how shareholders could do better.
Stryker (NYSE: SYK )
At first glance, surgical implants-maker Stryker seems a strange subject for an "anti-buyback" article. At 16 times earnings, the company carries a cheaper P/E than archrival Zimmer Holdi! ngs (NYSE: ZMH ) . Stryker's also growing faster, and pays a dividend, while Zimmer does not. While competitor Medtronic (NYSE: MDT ) -- and Zimmer, too -- is laden with debt, Stryker boasts a cash-rich balance sheet.
It's what Stryker intends to do with its cash that should concern investors. In October, you see, Stryker reduced estimates for revenue growth, yet at the same time promised to earn more than expected, upping its fiscal 2011 target to approximately $3.72 per share. With profit margins declining, hitting this new target may depend on reducing the share count, boosting per-share earnings.
Cue buyback. Earlier this month, Stryker announced it would boost its buyback plan by $500 million. With the growth rate still estimated at less than 11%, and free cash flow lagging reported net income, the shares don't look cheap enough that I'd buy them. Then again, I'm not on the hook for hitting an ill-considered profits promise. (Promise in haste, repent in leisure.)
JPMorgan Chase (NYSE: JPM )
Speaking of promises made in haste, did you hear that JPMorgan is increasing its buyback plan, too? It's true. With $8 billion in buybacks already authorized (and apparently spent) for this year, JP announced in December that it's upping its repurchase authorization by a further $950 million.
Good idea? JP's shares cost only seven times earnings, after all, and Wall Street has the stock pegged for 8% growth. That certainly looks cheap. The problem is that it may be "cheap for a reason." By now, you've no doubt heard about the troubles with European sovereign debt, the risk it may default... and the credit default swaps that banks like Bank of America (NYSE: BAC ) , Citigroup (NYSE: C ) , and JPMorgan could be o! n the ho ok for if default happens. Maybe the risk is overblown, maybe not. But until we're sure, JP might be better advised to keep a little extra cash on hand to deal with the risks -- not blow it all on another $0.95 billion worth of buybacks.
A better use of cash
Now, I don't want to end this column on a down note, and in fact, I have spotted one company out there that's spending its shareholders' money prudently. It's a name you probably know, seeing as I publicly recommended it just last week: Caterpillar (NYSE: CAT ) .
Doubling down on a program that's already rewarded shareholders richly, Caterpillar says that rather than allow its 2007 buyback program to expire as planned on Dec. 31, the company will extend it for another four years -- reopening a $3.75 billion war chest for opportunistic buys.
I think this is a great idea. At 14 times earnings, a strong 2% dividend yield, and a projected growth rate that tops 23%, the stock's already bargain-priced. If you ask me, this is one buyback program to bank on -- for Caterpillar, and for the investors who choose to buy it as well.
Looking for more great stock at "buyable" prices? You're in luck, because we've just found five of them. Read all about them in the Fool's new -- and free! -- report: "5 Stocks The Motley Fool Owns -- And You Should Too."
Wednesday, November 23, 2011
Top Stocks of 2012 Aflac (AFL)
Top Stocks of 2012
“Aflac (NYSE: AFL) is best known in the U.S. for its ‘duck ads,’ but actually earns over 75% of its money from Japan,” says Dirk Van Dijk.
In selecting the stock as his top pick for 2012, the strategist for Zacks.com, recalls “Aflac happens to be an old favorite of mine, a stock that I first recommended back in 1991.” Here’s his current update.
“In the U.S., its policies are sold through employers on a payroll deduction, as part of companies ‘cafeteria plans’. They are pretty straight forward. If you get sick and can’t work, or are in the hospital, it pays out a set mount directly to the insured.
“It is thus not at risk for rising health care costs (but is if more people get sick). The U.S. unit was under some pressure as payrolls shrank, but with some positive news on the employment front, that should turn around.
“In Japan, once people get AFL insurance they don’t drop it (which is very important in the life and health insurance industry) with a persistency rate of 95%.
“The firm has a superb track record, but came under big pressure during the crash last year due to fears about its investment portfolio. I think those fears are being assuaged over time.
“It has already realized $1.7 billion (pre-tax) in investment losses. Some of those are not going to come back, like its holdings in Lehman Brothers and WAMU, but other parts of the holdings that were written down just might come back.
“Aflac did however write down $380 million as other than temporary losses in holdings of some Ford debt, and Ford has been doing much better of late, certainly much better that it looked back at the end of the first quarter when GM and Chrysler were going down for the count.
“The company has generated an ROE of 33.4% over the last 12 months, and its five year average ROE is 20.84% (it has leveraged up a bit, from having no debt to a still very manageable and conservative 22% debt to capital. As that happens AFL should return to its historic valuations.
“How much upside potential is that? A Lot. Over the last five years (which of course included the big sell o? last year) AFL’s P/E has averaged 15.4x.
“Based on 2010 earnings estimates it is going for 9.5x now, and 8.7X 2012 consensus estimates, and those estimates have been rising.
“AFL also has a habit of beating the estimates. It has done so the last three times out, and in 17 of the last 28 quarters, with only five disappointments.
“AFL currently yields 2.4%, which is nice. It has however, increased that dividend in each of the last 27 years, and over the last 15 years it has done so at a compound annual rate of 20.7%.
“AFL happens to be an old favorite of mine, a stock that I first recommended back in 1991, and was a core holding for most of my tenure at C.H. Dean. I know the management team well from those days, and they are amongst the best I know in the industry.”
“Aflac (NYSE: AFL) is best known in the U.S. for its ‘duck ads,’ but actually earns over 75% of its money from Japan,” says Dirk Van Dijk.
In selecting the stock as his top pick for 2012, the strategist for Zacks.com, recalls “Aflac happens to be an old favorite of mine, a stock that I first recommended back in 1991.” Here’s his current update.
“In the U.S., its policies are sold through employers on a payroll deduction, as part of companies ‘cafeteria plans’. They are pretty straight forward. If you get sick and can’t work, or are in the hospital, it pays out a set mount directly to the insured.
“It is thus not at risk for rising health care costs (but is if more people get sick). The U.S. unit was under some pressure as payrolls shrank, but with some positive news on the employment front, that should turn around.
“In Japan, once people get AFL insurance they don’t drop it (which is very important in the life and health insurance industry) with a persistency rate of 95%.
“The firm has a superb track record, but came under big pressure during the crash last year due to fears about its investment portfolio. I think those fears are being assuaged over time.
“It has already realized $1.7 billion (pre-tax) in investment losses. Some of those are not going to come back, like its holdings in Lehman Brothers and WAMU, but other parts of the holdings that were written down just might come back.
“Aflac did however write down $380 million as other than temporary losses in holdings of some Ford debt, and Ford has been doing much better of late, certainly much better that it looked back at the end of the first quarter when GM and Chrysler were going down for the count.
“The company has generated an ROE of 33.4% over the last 12 months, and its five year average ROE is 20.84% (it has leveraged up a bit, from having no debt to a still very manageable and conservative 22% debt to capital. As that happens AFL should return to its historic valuations.
“How much upside potential is that? A Lot. Over the last five years (which of course included the big sell o? last year) AFL’s P/E has averaged 15.4x.
“Based on 2010 earnings estimates it is going for 9.5x now, and 8.7X 2012 consensus estimates, and those estimates have been rising.
“AFL also has a habit of beating the estimates. It has done so the last three times out, and in 17 of the last 28 quarters, with only five disappointments.
“AFL currently yields 2.4%, which is nice. It has however, increased that dividend in each of the last 27 years, and over the last 15 years it has done so at a compound annual rate of 20.7%.
“AFL happens to be an old favorite of mine, a stock that I first recommended back in 1991, and was a core holding for most of my tenure at C.H. Dean. I know the management team well from those days, and they are amongst the best I know in the industry.”
Sunday, November 20, 2011
3 Undervalued Tech Stocks to Buy Now
When investors see the words “undervalued tech stocks,” the first companies that jump to mind are probably the mega-cap giants like Cisco (NASDAQ:CSCO) and Microsoft (NASDAQ:MSFT). The large-cap space certainly has more than its share of cheap tech stocks, but a look into mid- and small-cap territory reveals other, less talked-about opportunities. Computer Sciences (NYSE:CSC), Lexmark International (NYSE:LXK), and China Digital TV (NYSE:STV), are three such stocks that deserve more attention than they receive.
Computer Sciences
Shares of CSC, an IT-outsourcing company, have been pummeled from a February high above $56 to $37.20 on Wednesday. The stock has been hit by less-than-stellar earnings results and concerns that the U.S. government’s perilous fiscal situation will weigh on the 39% of CSC’s business that comes from federal contracts. That’s undoubtedly a legitimate worry, but also one that is well-known at this point. At 7.3 times 2012 estimates (and a price-to-earnings-to-growth ratio of 0.9) and a share price sitting at 0.8 times book value, it appears that the bad news is fully discounted in the stock. Two other key points regarding CSC: first, the stock yields 2.2% – much better than you’ll find with the average large-cap tech stock. Second, the company is cash-rich and is frequently mentioned as a target of a buyout. Betting on a takeover is always a dicey proposition, but CSC offers investors a solid risk-reward tradeoff even without the benefit of a buyout.
Keep in mind: The last time CSC’s P/E was at this level, the stock traded up 25% in less than two months.
Lexmark International
A maker of printers, ink, and imaging products, Lexmark has seen its shares come under heavy selling pressure since late 2010 – a trend that wasn’t helped by its May earnings miss. While the printing business is indeed in gradual decline, it may finally be time to say “enough is enough” regarding the downturn in Lexmark’s share price. After hitting a high above $47 in mid-October, the stock now stands at $28.62. At this level, the stock trades at forward P/E of less than 7x, and removing the net cash of $7 a share (about a quarter of its market cap) on its balance sheet brings the P/E below 5.5x. A low P/E can be a trap when growth is slowing, of course, but the company’s core ink business continues to generate substantial free cash flow. And like CSC, Lexmark has the added benefit of being a strong candidate for an eventual takeover.
Keep in mind: The recent selloff has driven LXK’s valuation to its lowest level in history.
China Digital TV
The smallest of the three companies discussed here, China Digital could offer big potential to patient investors. The company makes smart cards that allow the conversion of an analog signal to digital. A boring business perhaps, but consider that China is the world’s largest TV market with 377 million viewing households. Of these, 187 million have cable and only 90 million currently have a digital signal. This adds up to a stellar growth opportunity for a company with no debt and over 70% of its market cap accounted for by the $214 million of cash on its balance sheet. The stock trades for less than 7x 2012 earnings estimates and a PEG of just over 0.4. Chinese stocks are not without risk, as 2011 has taught us, but patient investors who tune into STV may be in for quite a show.
Keep in Mind: Like LXK, CSC trades at an all-time low P/E.
Technology investing has been no picnic for investors thus far in 2011, but these stocks provide a compelling margin of safety in the event of further volatility in the months ahead.
Computer Sciences
Shares of CSC, an IT-outsourcing company, have been pummeled from a February high above $56 to $37.20 on Wednesday. The stock has been hit by less-than-stellar earnings results and concerns that the U.S. government’s perilous fiscal situation will weigh on the 39% of CSC’s business that comes from federal contracts. That’s undoubtedly a legitimate worry, but also one that is well-known at this point. At 7.3 times 2012 estimates (and a price-to-earnings-to-growth ratio of 0.9) and a share price sitting at 0.8 times book value, it appears that the bad news is fully discounted in the stock. Two other key points regarding CSC: first, the stock yields 2.2% – much better than you’ll find with the average large-cap tech stock. Second, the company is cash-rich and is frequently mentioned as a target of a buyout. Betting on a takeover is always a dicey proposition, but CSC offers investors a solid risk-reward tradeoff even without the benefit of a buyout.
Keep in mind: The last time CSC’s P/E was at this level, the stock traded up 25% in less than two months.
Lexmark International
A maker of printers, ink, and imaging products, Lexmark has seen its shares come under heavy selling pressure since late 2010 – a trend that wasn’t helped by its May earnings miss. While the printing business is indeed in gradual decline, it may finally be time to say “enough is enough” regarding the downturn in Lexmark’s share price. After hitting a high above $47 in mid-October, the stock now stands at $28.62. At this level, the stock trades at forward P/E of less than 7x, and removing the net cash of $7 a share (about a quarter of its market cap) on its balance sheet brings the P/E below 5.5x. A low P/E can be a trap when growth is slowing, of course, but the company’s core ink business continues to generate substantial free cash flow. And like CSC, Lexmark has the added benefit of being a strong candidate for an eventual takeover.
Keep in mind: The recent selloff has driven LXK’s valuation to its lowest level in history.
China Digital TV
The smallest of the three companies discussed here, China Digital could offer big potential to patient investors. The company makes smart cards that allow the conversion of an analog signal to digital. A boring business perhaps, but consider that China is the world’s largest TV market with 377 million viewing households. Of these, 187 million have cable and only 90 million currently have a digital signal. This adds up to a stellar growth opportunity for a company with no debt and over 70% of its market cap accounted for by the $214 million of cash on its balance sheet. The stock trades for less than 7x 2012 earnings estimates and a PEG of just over 0.4. Chinese stocks are not without risk, as 2011 has taught us, but patient investors who tune into STV may be in for quite a show.
Keep in Mind: Like LXK, CSC trades at an all-time low P/E.
Technology investing has been no picnic for investors thus far in 2011, but these stocks provide a compelling margin of safety in the event of further volatility in the months ahead.
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