Archive for the ‘tech’ Category

Oil v. alternative energy

Wednesday, December 22nd, 2010

Alternative energy is getting none of the boost that it has previously gotten from high oil prices. The reasoning has always been that high oil prices incentivizes investment in alternatives. It makes them cost competetive, and it makes the public conscious of the need to develop a diversity of sources. Yet, this graph suggests the reasoning is not present in the markets at the moment. The red and blue lines represent the price of oil (USL) and the iShares energy ETF; the green and pink lines are solar (TAN) and wind (FAN) ETFs, respectively:

oil-alternative.png

One likely expalanation is that wind and solar are primarily candidates for power generation, and as such compete with coal, natural gas, and nuclear. Oil, since it’s portable, is a transportation fuel.

Schwab: sectors

Tuesday, December 21st, 2010

The Charles Schwab site is rather big and complicated, and has gotten bigger and complicateder in the last few years. Sometimes, even customer service doesn’t quite know where to find things. For months, the site featured Credit Suisse’s Focus List under Research/Markets/Idea & Strategies. Then it disappeared, and four customer service discussions later, I still don’t know where it went.

Here’s a simple way to use the tools at Schwab that makes sense. Both Schwab and Ned Davis provide sector ratings, and all the ETFs associated with sectors are covered by MarketEdge’s technical indicators.

Currently, there three sectors that have a net positive rating from Schwab and Ned Davis. I gave a +1 for a positive rating, a 0 for neutral, and a -1 for a negative rating.

  • Energy +1 (Ned Davis)
  • Industrials +1 (Ned Davis)
  • Information Tech +2 (Both)

VGT (Vanguard Information Technology ETF) has a “Long/buy” rating from MarketEdge. Another way to go is the mutual fund BUFTX (Buffalo Science And Technology Fund), which is a no-load fund rated 4-stars by Morningstar. However, any mutual fund locks you in for 90 days on Schwab, unless you’re willing to pay a redemption fee. Both VGT and BUFTX are up about 4% since 11/22 (same as the broader market), when Ned Davis switched its rating to positive.

There are some net negative sectors also, but no unanimity:

  • Consumer staples -1 (Ned Davis)
  • Financials -1 (Schwab)
  • Telecom -1 (Ned Davis).

Health care and materials are “battlegrounds”–they have conflicting positive and negative ratings, but no neutral ratings.

Memory chips (MU, SMOD)

Sunday, December 19th, 2010

Micron (MU) is really cheap for a company of its size.

  • Forward P/E (fye Sep 2, 2012): 6.62
  • PEG Ratio (5 yr expected): 0.63
  • Price/Book (mrq): 1.00
  • Enterprise Value/Revenue (ttm): 0.87
  • Enterprise Value/EBITDA (ttm): 2.02

Book value is mostly tangible, and earnings & cash flow are very high in relation to market cap. It’s got a lot of cash: $3 billion in cash and another $3 b in receivables and inventory. Total liabilities are only $6 b. Its profit margins are around 20%.

However, 2010 seems to have been an unusually good year: 2010 Was a Boom Year in Chip Sales and One Tech Buy, One Tech Sell. Profit margins will decline, but the low valuations suggest negative expectation is already priced into the stock.

SMOD reported results last week, reinforcing the thesis that DRAM prices are pointed down: “Smart Modular said prices of DRAM chips were decelerating at 20-25 percent, hurting profits, especially in its key Brazil markets that account for over half of its revenue.” (Weak DRAM prices hurt Smart Modular results, outlook) Its stock is similarly cheap, although likely to be volatile due to the recent report. The problem may be more acute in Brazil than elsewhere, and perhaps SMOD’s other business segments are worthy of investment (the-smart-money-is-buying-today)

Micron is pretty much a pure play on memory chips. Smart Modular is more eclectic:

SMART Modular Technologies (WWH), Inc. designs, manufactures, and supplies value added subsystems to original equipment manufacturers worldwide. Its subsystem products include memory modules; solid state drives (SSD); and embedded computing and thin film transistor-liquid crystal display (TFT-LCD) products. The company operates in two segments, namely Memory, Display, and Embedded segment, and Adtron segment. The Memory, Display, and Embedded segment offers dynamic random access memory (DRAM) modules, flash memory cards and modules, and SRAM based SIMMs, DIMMs, and SO-DIMMs for industrial and other applications. The SRAM modules are also used in communication systems, point of sale terminals, electronic verification equipment, industrial instrumentation, medical instruments, disk drives, servers, graphics products, and workstations. This segment also offers eFlashTools and FlashTools, embedded computing products, and display products targeting gaming, kiosk, ATM, point-of-service, digital signage, and industrial control systems. The Adtron segment offers products, such as XceedLite, XceedUltra, XceedUltraX, Xceed IOPs, XceedSecure, XceedSCSI, and Xcel-10 that are industrial grade storage products. These products target defense, aerospace, industrial automation, medical, transportation, and enterprise industries. SMART Modular Technologies (WWH), Inc. also offers custom supply chain services, including procurement, logistics, inventory management, temporary warehousing, kitting, and packaging services. It sells its products directly and through a network of independent sales representatives principally to major OEMs that compete in the computing, networking, communications, printer, storage, and industrial markets.