Published:
March 25, 2009
The
correct answer is
(E.) Nam Tai Electronics (NTE)
Founded in 1975, Nam Tai is a
leading supplier of outsourced
electrical components. Consumer
electronics makers like Sharp rely
on the company for image sensor
modules and other parts in
flat-panel televisions, laptops,
digital cameras, video games, and
mobile phones. After tumbling from
$13 to $3, Nam Tai is a textbook
example of a company that has been
beaten up and left for dead because
sales and profits have fallen during
the recession.
At $2.83 per share, the firm's 45
million outstanding shares are worth
a total of $135 million. But
meanwhile, the firm has accumulated
a cash stockpile (net of a trivial
amount of debt) in excess of $230
million. On top of that, Nam Tai's
balance sheet contains $105 million
worth of accounts receivable and $27
million in inventory -- not to
mention $108 million worth of
property and equipment. All told, if
you add up the firm's assets and
subtract what it owes creditors, you
are left with a book value of $322
million, or about $7.15 per share.
Remember, Wall Street has put a
price tag of just less than $3 on
the stock.
It's not often that a company trades
at about $3 per share but has more
than $5 per share in cash. It's like
buying an old copy of Treasure
Island for $3 at a used book sale,
only to get home and find five $1
bills tucked neatly in between two
of the pages. The surprise find
would offset the purchase price --
essentially giving you the book for
free. But instead of a dusty book,
you might get an electronics
manufacturing facility or valuable
online real estate. This is about as
close as the market gets to a sure
thing.
Deep cash reservoirs also make Nam
Tai one of those cash-rich companies
that are more likely to stay afloat
during tough times -- there's
nothing more buoyant than cash. But
cash-rich companies can also print
huge gains for shareholders when the
market recovers because they can use
their "financial firepower" to
acquire weaker competitors and
become even stronger.
That's why StreetAuthority editor
Nathan Slaughter is monitoring NTE
and a handful of other choice finds
as part of the "Deep Discount"
Portfolio he presents in his
Half-Priced Stocks newsletter. Each
month, Nathan offers in-depth
analyses of companies and sectors
offering stocks with +25%, +50%, and
even +100% price-appreciation
potential. In the latest issue,
Nathan highlights Nam Tai and five
other stocks whose cash reserves
exceed their market caps by at least
87% and by as much as 206%--stocks
who are so undervalued that they're
poised to deliver outsized gains
once the market comes to its senses.
To learn the names of these stocks,
and to learn more about Half-Priced
Stocks,
please visit this link.
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