Dykstra: Scoping a Flash From the Past

Resurgent demand for NAND has SanDisk ready to roll.
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After focusing on the energy sector recently, I would like to turn my attention to technology, specifically flash memory. Between October 2006 and March 2007, NAND flash prices dropped for 20 consecutive weeks. During that time, SanDisk (SNDK) took a huge hit, falling from its 52-week high of $62 to as low as $37 at the beginning of March.

NAND flash memory allows large quantities of memory to be stored compactly, while retaining data for extended periods of time without power. This makes the memory particularly effective for portable devices, such as digital cameras and music players that are increasingly popular and common in the digital age. SanDisk sells the majority of its memory through its relationships with Toshiba.

The big hit to the price of NAND flash stemmed from significant overproduction. However, it seems that demand has now caught up to supply, and as more devices are produced and purchased using NAND flash memory, SanDisk is once again an exciting company. In addition, the higher prices of memory during the past month are providing additional gains to its producers and, provided demand has fully caught up to supply, should continue to do so.

The eagerly anticipated

Apple

(AAPL) - Get Report

iPhone that's set to be released in June will use NAND flash memory as opposed to the hard disk drives used by the iPod.

Assuming Apple sells 10 million iPhones, this would provide a significant boost to NAND flash memory producers. The iPhone move has led some, including analyst Keng Hock Lim at Credit Suisse, to believe that Apple may switch to using NAND memory in its ever-popular iPod line. Should the iPod line fully switch to NAND memory, SanDisk shares would further reap the benefits of Apple's hot run.

SanDisk should also get a boost from an agreement with its competitor,

Hynix Semiconductor

, to cross-license their patents on the advancement of NAND flash memory technology. This should help lower development and production costs and provide new profit opportunities.

This company is growing incredibly fast, with year-over-year quarterly growth of 55%. In addition, SanDisk has a great cash position -- with $2.83 billion of cash, and free cash flow coming in at about $140 million, SanDisk possesses a cast-iron balance sheet.

Don't let this next sentence fool you: The company's current P/E ratio is a lofty 46, but the growth potential brings its forward P/E to a very respectable 19.

In order to capitalize with deep-in-the-money calls, I must remain disciplined. The stock closed yesterday at $44.67 and is poised to move higher still. However, I cannot and will not chase a stock. I am going to place a GTC limit order at $10.80 to buy 10 July 35s (SWQGG). Remember: Patience is a virtue.

Sports, and the Players Club

The first week of April is a transition week in the world of sports. March Madness culminated in Florida's victory over Ohio State Monday night in the NCAA championship game. With its victory, Florida became the first repeat champion since Duke accomplished the feat in 1991-1992. In addition, the Gators became the first school to claim the NCAA championship in football and basketball in the same year.

Major League Baseball embarked on its arduous 162-game sojourn which encompasses the next six months. The most pressing question at this early juncture is, who will lease the Rocket for $4 million a month? Will it be the Astros, the Red Sox or the Yankees? We'll probably have an answer in the next four weeks.

This morning marks the opening day of the Masters, the first of golf's four majors, in Augusta, Ga. The honorary starter, a role that has been vacant since 2002, when Sam Snead last appeared, was filled by the great Arnold Palmer. Although Phil Mickelson won last year's tournament, all the buzz at Augusta is about Tiger Woods.

As you recall, Tiger won the last two majors of 2006, the British Open and the PGA. Therefore, if he wins the Masters and then the U.S. Open, he will have completed the second "Tiger Slam," whereby he holds all four majors, but not in the same calendar year. Remember, it was a decade ago that Tiger celebrated "a win for the ages" at Augusta, winning by 10 strokes.

On a more reflective note, the Bluffton University baseball team played its season opener on Friday, March 30, a month later than originally intended. On March 2, 2007, the bus transporting the Bluffton team to a tournament in Florida crashed, killing five members of the team and injuring several others.

With the permission of the victims' families, the team decided to play this season. Hence, with five white crosses hanging on the chain link fence adjacent to the visitor's dugout, and the uniform numbers of their deceased teammates displayed on the outfield fence, Bluffton opened their season. Clearly, the magnitude of their triumph could not be reflected on any scoreboard.

Similarly, a man who dominated the winning side of the scoreboard has passed on to the "gridiron in the sky." Eddie Robinson, the legendary coach of Grambling University, died late Tuesday night at the age of 88. Robinson is the second-winningest coach in college football history, with 408 career victories in 57 years. He sent over 200 players to the NFL, including stalwarts Willie Davis, James Harris, Ernie Ladd, Buck Buchanan, Sammy White, Cliff McNeil, Willie Brown, Roosevelt Taylor, Charlie Joiner and Willie Williams.

Perhaps the most well-known Grambling graduate of all is Robinson's successor as coach at Grambling in 1998, Doug Williams, who quarterbacked the Washington Redskins to a Super Bowl victory in 1988, earning MVP honors. Jim Henson, the genius who created the Muppets, once said, "Celebrate life for its differences, not its similarities." Eddie Robinson acknowledged and appreciated life's differences. More importantly, Eddie Robinson was a difference maker.

The Players Club recognizes the unpredictability and the uncertainties of life. With guaranteed recurring cash flow through our strategic partner, the Players Club can provide some predictability and certainty to the lives of athletes. After all, we never truly know when the scoreboard lights will go dark permanently.

Always remember: Life is a journey, enjoy the ride.

At the time of publication, Dykstra had no positions in stocks mentioned.

Nicknamed "Nails" for his tough style of play during his Major League Baseball career, Lenny Dykstra was an integral member of the powerful Mets of the mid-1980s, including the world champion 1986 squad, and the Phillies in the early 1990s.

Today, Dykstra manages his own stock portfolio and serves as president of several of his privately held companies, including car washes; a partnership with Castrol in "Team Dykstra" Quick Lube Centers; a state-of-the-art ConocoPhillips fueling facility; a real estate development company; and a new venture to develop several "I Sold It on eBay" stores throughout high-demographic areas of Southern California.