Recently, we have been considering adding some value stocks to our investment portfolio. The following stocks caught our attention and we have decided to share these ideas with our readers. These companies have strong balance sheets and cheap valuations. We are having trouble finding good value plays in today's markets but we think that the stocks discussed in this article may fit our investment criteria.
CalAmp Corp (CAMP)
CalAmp markets and develops wireless communications solutions for video, voice and data network communications. CalAmp has a market capitalization of $359 million and a net cash position of $58 million. We believe CalAmp is cheap with a PEG ratio of 0.77, a TTM PE ratio of 8.07, and a forward (2014) PE ratio of 12.79.
In recent years, CalAmp has changed its business focus from a network hardware company to a services/software company. Particularly, CalAmp is growing its software/services business through acquisitions. Most of these acquisitions are of small "Software as a Service" software companies. Some types of wireless applications these acquisitions address are applications that track company owned vehicles (fleet tracking) and applications that track vehicle usage to determine premiums for usage-based vehicle liability insurance. We believe that CalAmp is poised for continued grow through acquisitions as the wireless Internet continues to grow throughout the world.
Aastra Technologies Limited (AATSF.PK)
Aastra markets, develops, and supports a full range of products and services to support enterprise communications. Most of these products are based on VoIP technologies. We believe that Aastra is cheap based on a TTM PE ratio of 6.71 and a price to free cash flow ratio of 6.91. Aastra has a very solid balance sheet with a market capitalization of $206 million with $120 million (58% of market cap) in cash and no debt. In our opinion, Aastra has a stable business and is selling for a very cheap price.
Conrad Industries (CNRD.PK)
Conrad Industries repairs and constructs both aluminum and steel marine vessels through its operations in the gulf coast region of Louisiana, and Texas. Most of these vessels are barges that support oil and gas operations in the Gulf of Mexico. Conrad Industries has a market capitalization of $168 million and a net cash position of $30 million. Also, Conrad Industries has inexpensive valuation ratios with a TTM PE ratio of 9.30 and an EV/EBITDA ratio of 4.31.
We believe that Conrad Industries is a good way to play increasing oil and gas exploration activities in the Gulf of Mexico. In the next few years, we expect that the United States government will ease restrictions on oil and gas exploration operations in the Gulf of Mexico. When this happens, Conrad Industries is well positioned to profit from these exploration and development operations. Furthermore, in our opinion, Conrad Industries has a solid business that will provide near-term downside protection for investors as they wait for significant improvements in Conrad Industries' business.
Cisco Systems (CSCO)
Cisco markets, designs, and manufactures IP-based networking products such as switches and data storage devices. To say Cisco has a strong balance sheet is an understatement with its cash hoard of $46 billion compared with a market capitalization of $109 billion. Cisco also has inexpensive valuation ratios with a TTM PE ratio of 11.72 and a forward (2014) PE ratio of 9.70. Furthermore, Cisco has an attractive PEG ratio of 1.27 and a price to free cash flow ratio of 9.18.
Last quarter, Cisco grew year-over-year earnings by 44% and we believe that this excellent earnings performance is indicative of a company that is set to grow in the near term. We believe that Cisco is poised to grow earnings at a reasonable rate for the next few years. Cisco is the dominate player in its niche and we believe that trends in the growth of wireless communications/networking should bode well for Cisco in the coming years.
Zygo Corporation (ZIGO)
Zygo markets, designs, develops, and manufactures ultra-high precision measurement devices and optical sub-systems. We believe that Zygo is a good value play with a strong balance sheet demonstrated by its $77 million cash position compared with a market capitalization of just $285 million. Also, Zygo is cheap based on a TTM PE ratio of 8.49, a PEG ratio of 0.95, and an EV/EBITDA ratio of 7.44.
Our investment thesis regarding Zygo is that we believe that Zygo has a good, growing business that has as a future catalyst the potential for an increase in manufacturing in the United States. One of Zygo's main lines of business is measurement devices used in automated manufacturing. For instance, consumer products such as foods, beverages, cosmetics, and liquid cleaners are measured by high precision measurement devices before packaging or during quality control tests. If the economy of the United States continues to improve and some manufacturing returns to the United States from overseas, Zygo should experience solid gains in its manufacturing measurement business. In our opinion, there is little risk in holding Zygo shares and there is a good possibility that improvements in America's manufacturing sector will drive Zygo shares higher in the next few years.
Disclaimer: Ulfberht Capital is not an investment advisor. This article is not a recommendation to buy or sell securities. Always consult your investment advisor before making any investment decision.