$5.42
-0.17 (-3.04%)
Nam Tai Electronics, Inc. (NTE)
CAPS Rating:
An electronics manufacturing and design services provider to a select group of the OEMs of telecommunications and consumer electronic products.
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On May 14, 2009 at 7:06 PM, bullishbabo (99.95) wrote:
NTE (Nam Tai Electronics)
Time Frame: 2 to 4 years
This pitch is based on a stock price of $3.88.
First of all, this stock is cheap:
PB: 0.55
PS: 0.28
10 year average PE: 4.31
Why do I use 10 year average PE? It smoothes out the cyclicality. Nam Tai Electronics earned money every year for the past 10 years, and has had only a handful of quarters with negative earnings in its history. For a small electronics manufacturer and designer, that's an impressive history of profitability. Simply put, this company knows how to make money.
Take a look at the 3/31/09 balance sheet, and you see $5.14 per share in cash. This stock trades below its cash per share. As an additional bonus, this company has zero long-term debt and its cash alone covers all liabilities.
Before 2009, NTE paid a dividend for at least 10 years straight. Not long after NTE cut its 2009 dividend, the stock price tanked. It's not a guarantee, but I'm willing to bet that NTE reinstates its dividend when economic conditions improve. NTE is cheap even without considering the juicy dividend it used to pay, but the dividend is a nice future bonus.
I've been following NTE since before the crash and NTE was at $10. Unfortunately, they are very underwater for me now. I hope your pick is right and I'll get out of the negative with NTE.
I made that pitch on the strength of their earnings history and balance sheet. I expect their EPS to be slightly negative in 2009 and somewhat better in 2010. However, based on their track record, I fully expect an eventual return to profitability. I do believe that they're very undervalued at around $4. It's a bit disappointing to see NTE have so much cash lying around, but in better times, they will be a slow-growing, profitable company that pays a decent dividend.
All things considered, if you're holding shares that are currently around $4, you'd be selling extremely low if you sold. I agree with your decision to hold. I was able to buy in close to the bottom, but I'm expecting to hold 3+ years myself. It doesn't help that NTE has a super-low beta, which may mean that NTE climbs at a snail's pace back above $10.
If NTE is as safe as you think it is, then i will be thanking you three years from now for a 250% increase.
-solaris
Well if it goes to $10, it's a 150% increase. I am, however, expecting it to go higher than $10 in the next 3-5 years. Anyway, I'd recommend buying it as one of a basket of 10-15 stocks. I buy my stocks mainly using a mechanical investing approach. I let the numbers tell me what to buy. I do NOT look for economic moats of any type, nor do I spend hours reading years of annual reports. Nam Tai's earnings history, cheapness, and financial strength are very good for a small cap, and that's all I know.
Stock screening to me is an efficient combination of good profits and less time spent. If you want maximum profits, I recommend knowing your companies extremely well. Personally, however, I think beating the market using my stock screens is good enough for me. I buy a group of stocks, and on average, they do beat the market. It's important, however, to diversify if you're buying these things without knowing the ins and outs of the company.
For the purposes of this portfolio, I chose what I thought was the one holding from my portfolio that I am certain is currently undervalued and will definitely go up. I do have other holdings with decent numbers for the sake of diversification, since I do not do my due diligence as many others do. I simply look at the financial statements and look for any particularly bad rumors.