$5.29
-0.10 (-1.86%)
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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Summer hedge -- I don't have enough red thumbs in place right now and this company -- appearing as my Stock of the Day today -- seems a good candidate for near-term underperformance.
Its core business is weak. Its governance is questionable. Its market cap is lower than I think it was when I first started noticing it on stock screens a decade ago. My due diligence is close to naught on this stock -- if you challenge me as to what great scenario I have foreseen that causes NTE to underperform, I don't have one for you. It's just an intuitive call, and not one with high confidence at that. That's the why. Underperform -- and I'm likely to end this pick before summer's end, regardless.
One thing to consider before red thumbing this stock is that it is a caps 5 star while vastly under performing the S&P over the past couple of months. CAPS tends to have a decently strong mean reversion signal. This would suggest a 5 star stock that has been beaten up over the past few months is a stock to own rather than short.
Just some slightly quantitative perspective.
TMFBreakerDave -
Essentially you are playing a short-term gamble here, which is generally not the greatest approach on an already beaten-up company that has a real back-stop on its value of cash on hand (again, cash net of debt, not including minority interest). On top of it, they generally generate cash flows from operations, and have real free cash flow. Yes, this recession is hurting them (like everyone else), but the other contract manufacturers loaded up on debt for boom time acquisitions (FLEX and JBL), which is what makes the sector hurt so much during bad economic times; however, NTE played it safe, and didn't lever itself up, which is why it is a safer bet during the bad times, with upside when things turn around. Indeed, they themselves could get acquired due to their small size and solid balance sheet position. So overall, you have minimal downside risk, with lots of upside on this one.