From Sea To Shining Seagate

| About: Seagate Technology (STX)

Back in June, I advised that investors pick up shares of Seagate Technology PLC (NASDAQ:STX), a leader in the hard drive industry. I liked it for a lot of reasons: a dirt-cheap valuation, strong earnings growth, industry consolidation, a solid dividend, and best of all, support from my idol David Einhorn, who picked up a 5.4% stake.

Seagate has been one of my best-performing investments so far this year. I picked it up at a cost basis of $23.20, and my brokerage account tells me it's appreciated 15.9% since I bought it.

Despite the impressive run up in price, I still think Seagate is in a good place. It's definitely very tempting to sell the investment for a cool 16% gain, but investors largely brushed off Seagate's revenue forecast cut. While PC growth is sluggish, Seagate still has opportunities in other areas. The cloud computing and "big data" revolution will replace lost opportunities in the PC market with better opportunities in enterprise storage:

A prevailing trend has shown businesses placing data storage higher on their priority list. That's helping drive results for EMC, NetApp (NASDAQ:NTAP), Fusion-io (NYSE:FIO), Western Digital (NYSE:WDC) and other makers of hard drives and data storage systems.

Companies on average typically spend about 15% of their IT budget on data storage systems, says Forrester Research. They're adding, on average, nearly 50% more data storage capacity annually. [..]

Enterprise - corporate, government and education - spending on storage systems will increase to $42.4 billion in 2016, up from $33.4 billion in 2011, says IDC.

The fundamental argument for Seagate is that whether storage remains local or shifts to the cloud, we're in an age of ever-increasing data usage and storage. Any company that can effectively fulfill that need by providing storage solutions has the benefit of strong secular tailwinds.

Seagate has been serious about expanding, acquiring companies LaCie and DensBits to expand the product portfolio and SSD technology portfolio. I believe these acquisitions are a positive for the company, which has strong cash flow and a good balance sheet.

Seagate was recently added to the S&P 500 index, marking its "arrival" as a brand-name stock. It's also worth noting that Seagate has a strong share repurchase program. All of these factors add up to a big plus for potential Seagate investors.

While the stock obvious isn't as attractively valued as it was several weeks ago, I believe it still represents a good buy. P/E is still a bargain at around 6, and the 3.7% dividend is very solid. In the world of overpriced new-tech stocks, Seagate is a refreshing bargain.

Disclosure: I am long STX.