Seagate Technology (NASDAQ:STX)
Engages in the design, manufacturing and marketing of rigid disc drives. Produces a range of rigid disc drive products, which are used in enterprise servers, mainframes and workstations.
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It's all good, especially the PE & Yield
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Current lofty gross margin is not sustainable. Historical average HDD gross margin is in the teens. Reason for such high margin is due to the flood in Thailand last year resulting in severe undersupply. OEMs had no choice but to sign long term agreement, locking them into ridiculously high price. Those agreements are expiring this year. Hence, STX gross margin will crash and hence EPS will decline significantly in 2013.
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This company will mirror the s&p only slightly better for the simple fact that businesses need to keep their computer equipment in top shape to keep track off their financial information, sales, and normal business records.
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Cash generating machine
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Adding some to watchlist based on screener
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Hopped out after yesterday's big gain. Maybe I shouldn't have! This one is so cheap that it's an obvious buy (and the so-called headwinds are overstated).
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Pretty cheap, with a good dividend and a real good yield (5.49%). They also have good margins and a good balance sheet. Insider ownership is about 12.5%. Free cash flow covers the dividend almost 7 times over. So there's plenty of room to raise the dividend. They've also been steadily buying back shares. I'm not a big fan of buybacks, but is always better to see a company buying shares as opposed to selling more. I'll even predict by the end of 2013 this company will have a 4 star rating instead of just 3 stars.
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The stock is priced for disaster but it is still a strong company. http://www.realdealstocks.com/data-storage-doom-and-gloom/
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Magic Formula 11-29-12
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extremely low PE, total info stored increasing rapidly which means disk storage needs to increase, management wisely doing buybacks
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I just bought a hybrid drive and looked at their balance sheet plus ratios
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The PC might be "dead", but cloud computing is alive and well. Magnetic hard drives are still in high demand.
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Seagate Technology at the time of this writing is trading at $27.91 per share with a P/E ratio of 4.32 and an EPS of $6.45. STX offers a $.39 dividend (4.59% dividend yield). The company has an outstanding 96% ROE and an exceptionally hight 20.8 operating margin. Debt-Equity is good for its industry (.8 vs 1.3) and a low price to sales. The only negative I could find about this stock is it price to book value is high for the industry (3.1 vs 2.1) as well as the company's 5 year average (3.1 vs 2.5). However I find that the positives strongly outweigh the negatives and I see this stock out preforming that market for years to come.
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The industry has consolidated into a duopoly, STX and WDC, which means that pricing power should be much better going forward - Thailand's floods showed these two companies that the market can support a strong level of pricing. Valuation is excellent - I think the expectation of a 50% reduction of EPS is baked into the price, so even if PC's disappear, the margin of safety is good. I also think that thre will be growth on the server side.
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As long as they continue to provide stable earnings in this economy they should be good to go.
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I have been watching this one for awhile now and finally got in. I think STX is extremely undervalued on a valuation standpoint. Although the stock has run up quite a bit, I think this "should" be a double or triple in a year two, even at these levels. With outstanding earnings growth and a 4% dividend, there is a lot to like. Moving into the cloud space could prove to be one of the major growth drivers going forward for years to come.
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