This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Five Oversold Stocks: One Is a Strong Buy, One Is a Lotto Ticket

STX Revenue Quarterly Chart STX Revenue Quarterly data by YCharts

Seagate (STX - Get Report)

Background: Seagate Technology designs, manufactures, markets and sells hard-disk drives for enterprise storage, client compute and client non-compute market applications worldwide.

52-Week Range: $15.00 to $35.71

Book Value: $9.02

Price To Book: 2.9

Earnings Payout Percentage: 13%

Seagate is becoming one of the great value buys I look for. High-yield dividend of about 5%, and only 15% of profits are paid out. The company announced a dividend hike today, not a surprise considering the strong financial shape it is in.

The market is not allocating much weight to Seagate's strong income statement. Fears of a slowing PC market are weighing on shares. I believe the discount now offers an opportunity. Seagate is making the right moves and is a leader in storage.

The company has created the best of both worlds in storage. A combination of SSD with platters to create a product that is both fast and low in cost. If storage continues to move to the cloud, Seagate is well-positioned to exploit the sales.

If PC sales (or other products that use personal storage) pick up, Seagate wins. If not, Seagate continues with a focus on the enterprise. Either way, I expect Seagate shares to reward investors.

The shares have moved higher by 55% over the last 52 weeks. Analysts are calling for a price target of $28.76. I agree with a one year price target of $29 per share and over $30 two years out.

Short interest over 10% should give pause to investors looking at this company. The current percentage of the float short is 10.6%. There is a very good reason why I consider short sellers the "smart money" and RadioShack along with Seagate illustrate it perfectly. Unlike RadioShack, I consider Seagate a very good long-term investment.

I really like the options in Seagate. I am examining the January $24 strike put as the entry method. I want to collect at least $1.20 within the next week (Seagate stock likely needs to fall below $25 for that to happen).

If I sell the put option, and Seagate shares continue to fall, my cost basis is $22.80. I am very comfortable owning Seagate for less than $23 a share.

For non-option traders, Look for an entry near $24.75 as a relatively strong risk relative to reward play. STX Payout Ratio TTM Chart STX Payout Ratio TTM data by YCharts

At the time of publication the author had a position in RadioShack.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.
5 of 5

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
DD $55.57 -0.59%
PLCM $11.19 0.09%
PMCS $6.78 -0.29%
RSH $0.31 12.76%
STX $49.08 0.43%

Markets

Chart of I:DJI
DOW 17,723.27 +93.00 0.53%
S&P 500 2,102.65 +9.40 0.45%
NASDAQ 5,093.7970 +4.5910 0.09%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs