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Debt-Ceiling Standoff Awakens Value Investors

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Aceto Corp. (ACET)

Company Profile: Aceto distributes chemically derived pharmaceuticals, biopharmaceuticals, specialty chemicals and agrochemicals.

AFAM's Target Price: $13.32

Potential Upside From Current Levels: 113%

Clark's Take: International expansion has been the play on Aceto, as the company now derives almost 40% of its revenue from outside the U.S. Clark and his firm are also encouraged by the company's acquisition of Rising Pharmaceuticals, "which gives Aceto a presence as a developer and marketer of its own brand of pharmaceuticals."

"In addition, management expects to bring a number of new crop-protection products to market over the next few years," Clark says. "Aceto's balance sheet is still solid, post the added debt for the Rising acquisition. Shares, which carry a 3% yield, are trading slightly above book value and are attractively valued versus the company's historic earnings and sales multiples."

STMicroelectronics (STM - Get Report)

Company Profile: STMicroelectronics is a European-based global semiconductor manufacturer.

AFAM's Target Price: $19.70

Potential Upside From Current Levels: 150%

Clark's Take: STMicro shares are down nearly 25% this year as the company's wireless joint venture with Ericsson continues to drag on its strong momentum in its other core divisions. "Investors seem to be assigning STM's portion of the joint venture a negative value," Clark says.

However, Clark expects that either positive traction with the joint venture or an outright divesture could provide upside to the stock. "With a strong roadmap in products for automotive, consumer and industrial applications, STM is targeting faster market growth in 2011, and the company has proven it is more than willing to shed low-margin businesses," Clark says. "The firm's balance sheet and free cash flow should support the dividend, currently a rich 3.4%."

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-- Written by Robert Holmes in Boston.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.
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CHK $5.50 7.00%
CTB $41.14 0.81%
E $32.03 1.10%
DIS $117.96 -1.20%
STM $6.96 -2.00%


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