Motorola in the Mud: Good Buying Opportunity?

| About: Alphabet Inc. (GOOG)

There's a maxim on Wall Street that says "Buy when there's blood in the streets." Many times when the news on a company or on the market is at its bleakest, is the time to buy. When everyone is running for exits, this could be your time to stay calm and swoop in for easy, cheap pickings. It takes a steely disposition to go against the crowd and start acquiring the shares of a company whose name is synonymous with mud. But carefully orchestrated, this strategy can pay off big, and give the investor a true sense of accomplishment and pride that he was the first on the bandwagon when the began its run.

Shares of Schaumburg, IL-based Motorola have sunk about 10% over the last 12 months. The introduction of Apple's (NASDAQ:AAPL) iPhone grabbed all the good headlines, and left Motorola and others on the back pages. And the press that MOT has gotten lately has not been good, and deservedly so. The company stinks right now, and they are trying to figure out how to fix things, but with not much luck. It doesn't help that the board spent its time fighting off Carl Icahn's bid for a seat on the Motorola board.

But take interest when you see bad press, and repeated analysts downgrades. While the company may still have a lot to fix, the stock may be beginning to bottom.

In fact, an article at advised investors to dump the stock. The article cited insiders dumping their shares, and noted that several brokerages have lately cut revenue and profit estimates for the company, as well as cut the price target of the stock. Also, on Tuesday, RBC joined the other dissenters and lowered its revenue estimates for the company for the remainder of the year.

But there are some bright spots, too. Return on Equity is still over 17%, and the company generates healthy free cash flow. Motorola has about $3 billion in cash on the books. And Motorola will use some of that cash to buy back its own shares, at what should prove to be very attractive prices.

There are numerous stories about beaten up companies and stocks that pick themselves up, and come back from, what everyone is saying, is the end for the company. One of these days I'll blog about a few of these. Remember McDonald's in 2003?

I don't know for sure if Motorola's blood is on the street, but it does seem that everyone hates this company and its stock lately. So this may be the time to love it. Long-term oriented investors in Motorola should be well rewarded.

Disclosure: I own stock options on MOT's stock.

MOT 1-yr chart