AGAINST MY WILL

NSTC

I did something I normally do not like to do. I averaged down NSTC at 8.50 this morning. There are some risks here, mostly relating to the market. It appears to me that the market, particularly tech, does not want to go up. On the other hand, NSTC had a decent quarter, although outlook for 05 is lowered, thus the disappointment. At this level, the valuation is simply compelling. It is traded at 13X of lowered 05EPS, assuming 06E remains the same, 9X of 06EPS, while growing at more than 20% a clip. Balance sheet is clean with cash balance of $3.0 per share. The market is essentially believing that NSTC would fail to grow, and it would continue to lower outlook in the next couple of quarters, which is hard to believe. This company still growth 28% of its top line and its backlog remains very healthy. If it simply delivers its Q3 guidance, the share should move up. The risk/reward is compelling here.