Jobe01 (96.47)

Don't Miss This Homerun

October 29, 2009 – Comments (4) | RELATED TICKERS: COGO , TQNT , QID

Peter Lynch of Fidelity fame used to say, and I'm paraphrasing, 'look for stocks with excellent balance sheets, those which offer a product you understand.'  I've found such a stock, have bought and sold it on occasion, making profits everytime.  The stock I'm thinking of, referring to is Cogo.  Cogo, formerly known as Comtech, is based in China, and builds/creates handset designs for the mobile market. 

The company's balance sheet is pristine.  They have no debt, none.  They have about 36 million shares outstanding, and $108 million in cash.  That's $3/share.  The stock closed yesterday at 5.66 per share.  They made about .08/share in their last 1/4.  During the last earnings cc, the CEO offered guidance of around $80 million in revenues, and income per share of .17 to .18 per share.  That's approximately 8 time annual earnings.  Also, the company recently announced, and I quote " Cogo today announced a series of module design wins within multiple Smartphone and Smartbook products on both Windows Mobile and Android platforms."  Cogo is in a growth industry with huge potential for further growth.

Looking at the stock technically, it's putting in a triple bottom, having hit 5.20 in July, 5.20 again in early Sept, and now trading in the mid 5.60s.  Relative strenght dipped to around 30 yesterday. Given guidance, recent design wins, the oversold condition of the stock, and earnings coming up next week, I don't expect cogo to hit 5.20 again. 

Now I'm a trader, and I'll buy a stock which is technically oversold, and will sell it when it's technically overbought.  I've done that a number of times with Cogo and other stocks.  That said, Cogo is in a ripe position, offering excellent opportunity for both the trader and the investor.  If you've read my occassional blogs, you'll notice that I harp on buying stocks which offer clean balance sheets, growing revenues and profits, in growth industries.  If Cogo doesn't fit that model to a T, then I know nothing of what I'm saying.

Cogo is a rarity, in that the stock is trading close to CASH Value, with no debt, increasing revenues and profits, in a strong growth industry.  Plums like this don't come along often.  The smart investor would do well to pick this plum.

 Jobe