By Larry Gellar
Today we’ll be taking a look at the Nasdaq’s 5 most traded stocks from a recent trading session. Big names like Microsoft (MSFT), Intel (INTC), and Cisco (CSCO) made the list, and it’ll be interesting to see how these companies perform in 2012. Some investors are worried that smaller companies will provide significantly more growth. Meanwhile, unusual circumstances catapulted Compuware (CPWR) and Frontier (FTR) into heavy trading. Let’s see what’s been happening with these 5 stocks:
Compuware Corporation has been volatile lately, and much of the recent chaos can be attributed to funds that needed to sell Compuware due to its removal from the S&P 500 (SPY). With a market capitalization of just over $1.8 billion, Standard & Poor’s felt that Compuware should be moved to the S&P 400 GICS Application Software Sub-Industry index. Meanwhile, Compuware is having some tremendous success with its Covisint subsidiary. Here’s what David McGuffie, Covisint president and COO, had to say about a recent project:
Technology works best when it serves the greatest good; in this case, helping Intermountain document its delivery of the best patient care possible while also helping it receive a nice reimbursement. Covisint took Intermountain's existing data, analyzed it and--without disrupting workflows--made the PQRS submission process easy, effective and efficient.
Important competitors for Compuware include BMC Software (BMC), CA Technologies (CA), and International Business Machines (IBM). Those stocks are cheaper using price to earnings and price/earnings to growth ratios but more expensive using price to sales ratio. That can be partly explained by Compuware’s high operating margin (15.01%) and high quarterly revenue growth (15.40%). As for cash flows, Compuware had $30.35 million come in during fiscal year 2011 and $116.38 million flow out during the 6 months after that.
Microsoft Corporation has been up and down the past few days, and investors are carefully analyzing a Windows Phone roadmap that was purportedly leaked from the company. It appears that Microsoft wants to go toe-to-toe with the iPhone 5 by introducing a “superphone,” but it seems unlikely that the company will be able to dethrone Apple’s (AAPL) iOS or Google’s (GOOG) Android. Until the superphone comes out though, Microsoft has other ambitious plans. In the high-end market, Microsoft will release Windows Phones with LTE, while the company’s Tango project seeks to gain share in the low-end market. Other questions for Microsoft include its ability to fight piracy, especially in less regulated emerging markets. If Windows 8 turns out to be a big success, it won’t matter as much if people are getting their hands on free copies. Microsoft has also come up occasionally in talks about a possible Yahoo (YHOO) buyout. After all, there are a variety of ways that Microsoft’s business would benefit from having Yahoo in its pocket. Important competitors for Microsoft like Apple, Google, and Oracle (ORCL) all have higher price-to-earnings and price-to-sales ratios. Price/earnings to growth ratio for Microsoft is the highest out of those companies at 0.98, however.
Frontier Communications Corporation has been volatile recently, and the company just delivered a hefty dividend to its shareholders. At an annual rate of $0.75 per share, dividend yield for this stock is a whopping 14.60%. More information about Frontier’s dividend can be found here, and expectations are that even if the dividend is cut, yield will still be pretty high. Other statistics for Frontier Communications are a bit worrisome though. Both the intangible assets ratio and tangible book value for this company are abnormally high. Important competitors for Frontier Communications are AT&T (T), CenturyLink (CTL), and Fairpoint Communications (FRP). At 31.99, Frontier Communications has by far the highest price-to-earnings ratio out of those stocks. Terrific margins help explain that – those numbers for Frontier are 75.00% gross and 19.47% operating. As for cash flows, $107.43 million flowed out of the company during 2010 and $45.45 million flowed out during the first 9 months of 2011. Needless to say, Frontier will need to turn that trend around in order to keep up its dividends. Year-over-year quarterly revenue growth is actually -8.00%, which is also contributing to the problem. The company is trying to cut expenses though – in fact, FTR stock was recently moved to the Nasdaq to help save money.
Intel Corporation has been up and down recently, and there are a variety of factors one should consider before purchasing this stock. The company’s market share continues to improve as its microprocessors have become quite dominant. Trends like cloud computing also stand to benefit Intel because of the company’s data center business. Superior technology, powered by owning its own chip foundries, makes Intel a true leader in the semiconductor industry. On the other hand, Intel has fallen behind in mobile products as most companies have gone with ARM-based systems. ARM architecture could be a competitive force for PCs in the future as well. Meanwhile, some analysts are predicting a serious slowdown in PC sales in the near future. Important competitors for Intel include AMD (AMD) and Texas Instruments (TXN). Intel has the lowest price/earnings to growth ratio, although price-to-sales ratio of 2.42 is quite high. That can be explained by the company’s terrific margins – those numbers are 62.46% gross and 32.77% operating. Those margins will probably come down a bit though once the quarters affected by the floods in Thailand are taken into account. Regardless, if INTC stock has been beaten down unnecessarily from the unfortunate flood news, a buy would certainly be justified.
Cisco Systems, Inc. has steadily declined in the past few days of trading, but the time to buy could be now. With a strong balance sheet and sales coming from a diverse set of customers, Cisco is probably undervalued. Insider buying combined with decent dividends and a share repurchase program will also keep CSCO moving up. Cisco also made some key corrections to its business in 2011. The current restructuring plan will help Cisco focus on its true competitors instead of getting the company caught up in small projects that probably won’t work out. Important competitors for Cisco include Alcatel-Lucent (ALU), Hewlett-Packard (HPQ), and Juniper Networks (JNPR). Those stocks have lower price-to-sales ratios, a testament to Cisco’s terrific margins. Those numbers are 61.43% gross and 20.14% operating. Meanwhile, recent news for the company includes rumors that it’s hiring David Ward away from Juniper. Ward is said to be the company’s next service provider chief architect, and an email from Cisco says the position is “responsible for defining Cisco's long-term service provider strategy, business and technology architectures, and road maps for technology innovation.” Ward was chief technology officer of the platform services segment at Juniper, and this figures to be a wise move.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.