The last quarter was extremely unkind to the equity markets. Some of the hardest hit sectors were semiconductors and anything related to the solar/alternative energy industry. The earnings visibility in these industries in the near term is murky at best. However, long term investors with at least an 18-24 month time horizon should be rewarded handsomely by taking positions in equities that have been beaten down to the point of pricing in the apocalypse. Two stocks, Power-One (PWER) and MEMC Electronics (WFR) are two that could easily double or better once worldwide growth and confidence gets back to a more normal level.
Power-One (PWER) – Power-One, Inc. designs, manufactures, and markets power conversion and power management solutions for the renewable energy (RE), communications infrastructure, and other technology markets. (Business Description from Yahoo Finance)
5 reasons Power-One is a great long term bargain at under $5 a share:
- PWER is selling at the very bottom of its five year valuation range based on P/E, P/S, P/B and P/CF.
- It has a pristine balance sheet with approximately 25% of its market cap in net cash.
- PWER has a forward P/E of 4.5 which is a 85% discount to its five year historical average
- Power-One is priced at less than half its trailing annual revenue and its five year projected PEG is under .4.
- Power-One is dramatically under analysts’ price targets. The median analyst target on Power-One is $9 and S&P has a price target of $8 on PWER.
MEMC Electronic Materials (MEMC) – MEMC Electronic Materials, Inc. engages in the development, manufacture, and sale of silicon wafers for the semiconductor industry worldwide. Its wafers are used as the starting material for the manufacture of various types of semiconductor devices, including microprocessor, memory, logic, and power devices. The company operates in three segments: Semiconductor Materials, Solar Materials, and Solar Energy. (Business Description from Yahoo Finance)
4 reasons MEMC Electronic is a buy at under $6 a share:
- Myriad insiders have bought shares over the last two months.
- WFR is selling at the very bottom of its five year valuation range based on P/S, P/B and P/CF.
- MEMC has a five year projected PEG of .45 which is a 50% discount to its five year historical average.
- MEMC Electronics is way under analyst’s estimates. Credit Suisse has a price target of $11 on WFR, and the median analysts’ price target is $9.