David Einhorn is one of my favorite deep value investors. No other money manager tends to mimic my long and short positions more than he does. I also will always be grateful to him for his exposure of Green Mountain Coffee Roaster's (GMCR) issues that cratered the stock as I had a large short position in it at the time for similar reasons. It was recently disclosed that he increased his fund's position in Seagate Technology (STX) by over 9mm shares. Given the stock's rock bottom valuation, value investors should take notice.
7 reasons STX is deeply undervalued at $23 a share:
- The stock yields a robust 4.3% which should put a floor under the stock.
- It is selling for a ridiculously low 2.4 forward earnings.
- The stock increased operating cash flow 50% from FY2009 to FY2011, and the stock sells for less than 5 times operating cash flow.
- The company has easily beat earnings estimates for four straight quarters. The average beat over consensus during that time span is 17%.
- Consensus earnings estimates for FY2012 and FY2013 have moved sharply higher over the last two months.
- Analysts project the firm to grow revenues north of 25% for both FY2012 and FY2013 and it has a minuscule five year projected PEG (.09).
- The 19 analysts that cover the stock have a median price target of $34 on Seagate and S&P has its highest rating "Strong Buy" and a $41 price target on STX.