SEAGATE
STX / NSTC
I sold my entire position of NSTC this morning and replaced it with STX, which reported very strong earnings last night. Revenues, earnings and cash flow all showed very strong growth and the company increased its outlook for fiscal 2006. ASP moves up and inventory lowered and all segments showed momentum. Pending merger with Maxtor removes the threat of pricing competition somewhat. Management is very confident. Despite the gap-up this morning, valuation remains rather modest (about 10X of its FY07 EPS). I have bought STX a few times and it appears that this one does not get any respect from the Street. Based on the fundamentals, I believe it could go to $30 easily this year, which is about 15%. I am not sure that NSTC will be able to generate the same return, not to mention that I have to take some earning risks in the next few weeks.
SES
I also opened a very small position on SES. This one is a pure bet on management. Four executives from Precision has recently moved into SES with significant incentives. These guys are pros and I would like to believe that they would want to create another PD in the next few years.
I sold my entire position of NSTC this morning and replaced it with STX, which reported very strong earnings last night. Revenues, earnings and cash flow all showed very strong growth and the company increased its outlook for fiscal 2006. ASP moves up and inventory lowered and all segments showed momentum. Pending merger with Maxtor removes the threat of pricing competition somewhat. Management is very confident. Despite the gap-up this morning, valuation remains rather modest (about 10X of its FY07 EPS). I have bought STX a few times and it appears that this one does not get any respect from the Street. Based on the fundamentals, I believe it could go to $30 easily this year, which is about 15%. I am not sure that NSTC will be able to generate the same return, not to mention that I have to take some earning risks in the next few weeks.
SES
I also opened a very small position on SES. This one is a pure bet on management. Four executives from Precision has recently moved into SES with significant incentives. These guys are pros and I would like to believe that they would want to create another PD in the next few years.
posted by ZIGZAG at 1/19/2006 11:03:00 AM
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