Investing in Tech in 2013 could probably best be described as a situation of have an have nots. For every highflying web or “cloud” stock marching to what feels like new highs on a daily basis, there are the forgotten ones, the “old tech” hardware & software vendors like AAPL, EMC, IBM & ORCL that can’t manage to get out of their own way, all down on the year. Then there are some in the telecom equipment and pc/smartphone supply chain that have gains but just lag the broad market, like INTC, BRCM, CSCO & QCOM.
As the market makes new highs, a logical plan for the last quarter of the year would be to stick to what has worked for the first 3 quarters, yet if we do breakout and continue to mark uncharted territory into year end, it is likely that we begin to see some laggards start to participate as the major indicies broaden out.
One stock that caught my eye this morning was GLW, the flat panel glass maker for smartphones, tablets and TVs (with a slew of legacy telecom equipment businesses). The stock is not one that you hear about too often as it is not that sexy of a company hailing from the small town of Corning in upstate New York (right in my backyard growing up outside Syracuse). The analyst community is fairly mixed on the company with 10 Buys, 12 Holds and 1 Sell with an avg 12 month price target of $16.50.
The main cause of the earnings declines over the last couple of years has been the collapse in glass pricing due to overcapacity, but if current Wall Street estimates are correct, this could be abating, causing earnings to be flat this year and growing next year at high single digits.
The stock currently trades at ~10x next year’s expected earnings, below the average for the last 10 years. They have a quarter of their market cap in cash, 16% net of debt, a large share buy back and pays a dividend that yields 2.7%.
In addition to the fundamentals, the technical set up is quite interesting. The one year chart below shows the very healthy base the stock has been forming above $14 since breaking out to that level back in April on better than expected Q1 results, and the rising 200 day moving average, which it has held since early March.
The stock has essentially consolidated those early year gains for the past 6 months. That consolidation might lead to another new breakout in the coming months, especially if the October 30th earnings release is a positive catalyst.
Keeping a close eye on this one, as a test and hold of $14 could be the ideal spot to play for a year end rally in a name that could play a little catch up.