At the current level, the stock is simply cheap. The shares trade for less than one-third of tangible book value and have an enterprise-value-to-EBITDA of just 3. The company is extremely sensitive to economic conditions, but I believe this is priced into the stock. When the economy does recover, this stock should be a market leader.
Integrated Device Technology (IDTI) is still on the list as well. The semiconductor company has also had a tough year and recently reduced its forward guidance. As a result of what the company described as deteriorating order conditions, revenue forecasts for the quarter were dropped by a range of 15% to 18%, and earnings estimates were cut as well.
Integrated Devices is well positioned to withstand the downturn. It has over $300 million in cash and no debt on the balance sheet. Although profits may be slipping, the company is still profitable, unlike many other technology companies this year. The company has a strong global presence, with over 70% of revenue coming from outside the U.S. Integrated Devices will be able to put its cash to work in the current weak stock market in the form of either acquisitions or stock buybacks. The flexibility of a strong balance sheet should allow the company to be a leader in the eventual recovery.
Medical device manufacturer Boston Scientific (BSX) made the list as well. This one comes with two huge caveats. First, it is near the upper range of my debt limitations for an individual corporation. The second is that because of acquisitions over the years, tangible book value is actually negative.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV