I have identified two stocks that appear to offer a strong value:
1. LSI Corporation (LSI)
LSI Corporation designs and markets networking and storage semiconductors. As the hard disk drive shortage fades and volumes pick up there, LSI should see a nice boost. In addition, the acquisition of SandForce - one of the leading developers of solid state drive controllers used by many drive vendors - should also provide LSI with a nice avenue for growth going forward.
Further, network chips should see healthy demand, especially as data traffic for private and public clouds expands.
The company has a strong $623M cash position with no debt. Quarterly earnings growth year-over-year of 332% is strong as is the 31.5% year-over-year quarterly revenue growth. PEG ratio is 1.46, slightly above the mean for semiconductors of 1.38. Price to book is 2.82, slightly below the industry mean of 3.03.
At $6.32, the company seems to offer strong upside potential.
2. Seagate Technology (STX)
Seagate designs and manufactures hard disk drives for use in both consumer and enterprise. Normally, I would not be particularly bullish on a hard disk manufacturer, especially one that has warned of shrinking margins, but I feel a strong 3.68% dividend and a price-to-earnings ratio of 6.25 make Seagate initially attractive.
However, what really does it for me is that they seem to finally be willing to pursue the solid state drive push. The recent equity stake in DensBits is a step in the right direction, but certainly not enough to really get them in the market. What interest me are the recent rumors that Seagate is considering the acquisition of OCZ Technology Group (OCZ), one of the leading solid state drive developers. With OCZ's own controller technology (thanks to the acquisition of Indilinx) as well as its strong presence in both the consumer and enterprise markets, Seagate would immediately become one of the strongest solid state drive competitors in the market.
I prefer Seagate to Western Digital Corporation (WDC) primarily due to the dividend and the willingness to pursue solid state drive technology, although I suspect if Seagate acquires OCZ, Fusion-io, Inc. (FIO) and STEC, Inc. (STEC) immediately become hot acquisition targets for Western Digitial.
Disclosure: I am long OCZ.