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  • LSI Corp. And The Golden Cross

    Scrolling through a CNBC slideshow called, "20 Stocks With The Potential To Pop," I came across the mid-cap LSI Corp (NASDAQ:LSI). I was using another tab to skim through the profiles of companies that seemed interesting to me, and this one caught my eye for some reason. After some further research I decided to add it to my watch-list and keep a close eye on it. So as disclosure, I do not own this stock….yet. This article is just to share my research with you SA readers.

    Company

    LSI Corporation designs, develops and markets storage and networking semiconductors. The Company offers a portfolio of capabilities, including custom and standard product integrated circuits that are used in hard disk drives, solid state drives, high-speed communications systems, computer servers, storage systems and personal computers. LSI provides products for original equipment manufacturer (OEM), companies, in the server, storage and networking industries. In May 2011, LSI sold its external storage systems business to NetApp, Inc. On January 3, 2012, the Company acquired SandForce, Inc. The storage products provides secure movement of digital data to and from host machines, such as servers, personal computers and storage systems to the underlying storage devices, such as hard disk drives, tape drives and flash solutions.

    - Scottrade

    According to the LSI website, analysts predict that the storage industry will grow 35% per year over the next few years. They claim to be well positioned to take advantage of this growth with their semiconductors and software. Their Channel Alliance Partner Solutions Program (CAPS) boasts partnerships with companies such as Hitachi, Intel, Microsoft (NASDAQ:MSFT), Oracle (NYSE:ORCL), Samsung, VMware (NYSE:VMW), and many more.

    There are currently 18 analysts covering the stock, with price targets significantly above its current level of about $7.3. Back in August, Goldman Sachs upgraded shares from neutral to buy with a target of $9 driven by top-line growth and margin expansion.

    LSI is trading at a P/E of 24, which is a little above average. I believe this is justified because of their recent earnings growth. This is something to watch out for though. You're paying up for a great growth company, so watch it closely.

    Financially, LSI is very appealing. They have growing revenue and cash flow. Most importantly to me though, is that they have no debt. The company was able to pay off all of its debt a few years ago, and now is free of it. This is one of my favorite things to see in companies as it shows good management and the right plan. Also, they recently started a share buyback, showing that they want to return some value to shareholders.

    The Golden Cross

    So after researching the company itself, I got even more excited about LSI when I looked at the chart. I saw that it is approaching the fabled golden cross. The golden cross is when the shorter-term moving average crosses above the longer-term moving average. It usually precedes a move upward in stock price. Not a guarantee, but a strong technical indicator. The pattern is approaching on the daily chart shown here:

    I have circled the point at which the MA lines are close to crossing. As you can see in the boxed section on the left, the 50 day moving average is close to the 200 day moving average price. I hope to see averages cross to be a buyer, and I'd like to see strong volume. Another thing to point out is that the Point & Figure chart has a bullish price objective on LSI at $14.75, almost double the current price.

    Now that I had seen the fundamentals, financials, and possible golden cross, I decided to look for some recent performances of similar companies that had golden cross patterns. I screened for the proper technicals and other tech companies. Here are a few that popped out:

    So as you can see, the golden cross has been prosperous for the technology industry recently. These are just a few of the companies that had solid gains since the cross. If you like LSI the company, then you'll like LSI the chart. Watch it closely to see if it forms the technical pattern you want.

    My strategy is to find a fundamentally good company, and simply use technical analysis as a means to an entry point to maximize gains.

    Risks and Conclusion

    As with any company, there are risks. This particular industry is very competitive. LSI Corp. has no guaranteed position in the market. Even though I believe the company is well positioned and is on the right path to returns, I will keep a close eye on it. So do your own due diligence and invest at your own risk. I hope this article gives you a good start and idea to further research. Comments are always welcomed.

    Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in LSI over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Sep 25 11:58 AM | Link | Comment!
  • Apple: Don't Miss This Opportunity

    Apple's (NASDAQ:AAPL)earnings for Q3 came in below analyst expectations. The street was looking for about $37 billion in revenue according to Bloomberg Businessweek, translating to $10.35 earnings per share. Apple came in below (but above their own guidance) with revenues of $35 billion and $9.32 per share. This caused the stock to plummet after hours about 5.9% to $568.27. This, in my mind, presents an excellent buying opportunity. An opportunity that we may not get again. Apple is a dominant force that has continually drawn society to its products. So why did the stock have a massive selloff just because of one good, but not blow-out quarter? I don't have an answer to that. All I can do is try to provide you with my point of view, and show you why I think you should own it. Keep in mind that my views are based a long-term holding horizon:

    iPhone Sales:

    Everybody had heard that iPhone sales might not be up to par this quarter because people are holding out for the iPhone 5. So why didn't anybody listen? We have been spoiled quarter after quarter with blow-out results. This quarter's iPhone sales should not have been a focus. Maybe it was bad timing on the company's part with the reveal of the new iPhone. So what? Sales were 26 million, down from the estimated 29 million. They were up by 28% from the same quarter last year though, which is hardly a disappointment. And I don't think 3 million less iPhone sales in this quarter will hurt them long-term. It could even be a sign of how big of a hit the iPhone 5 is going to be. Last time Apple was below earnings estimates was the fourth quarter of 2011, which just so happened to be before the release of the iPhone 4S. The stock dropped about 5.6% the next day (sound familiar?).

    So just for fun, let's look at Apple's earnings without the iPhone. The 29 million iPhones (with accessories) sold that analysts were looking for would have brought in about $18.07 billion in revenue. Without that, the overall estimated revenue comes down to $18.93 billion from $37 billion. The real revenue without the real iPhone sales, is $18.8 billion. So take away the "disappointing" iPhone revenue, and Apple was only $130 million below estimated earnings. The point I'm trying to make with this arithmetic is that because of people holding out for the next iPhone (which I believe to be the case), earnings were seen as dismal. But take those away, and you have only a $130 million miss as compared to a $2 billion miss. In that respect, Apple would have been almost spot-on. And don't mistake an earnings miss for a decrease in earnings. A miss does NOT equal bad earnings. Most companies would kill to have Apple's earnings growth, but that's another issue.

    iPads and Education:

    The results of the iPad were really what I was looking for. This was the first full quarter for the new (3rd) generation. Numbers were solid, with 17 million units sold. That is a whopping 84 percent increase from the same quarter last year. This product has taken ahold of the markets quickly, and I think they will keep on rolling out of the stores.

    Schools are turning to technology like the iPad to assist in learning more and more. This is a trend that should catch on fast and continue to grow. They have even been helping special-needs students learn and communicate more effectively. Having just graduated high school, I have seen the transition to more and more technology in the school system and how effective it can be. Apple products are at the forefront of this revolution that has only just begun.

    Cash and Dividend:

    Everybody has heard of Apple's ginormous stash of cash. They added another $7 billion this quarter, bringing their total cash balance to a mind-blowing $117.2 billion. Investors have been begging for the company to put some of it to good use, and now they are. Apple will start paying a $2.55 per share dividend. This will open the stock up to a myriad of funds that were not able to buy into it because it did not pay out a dividend. I believe this factor is under-rated and could propel the stock even higher. With the kind of balance sheet Apple has, the investment risk is suitable for most investors. It will cushion them in the future against potential competition and litigation.

    Future:

    The use of mobile devices, cloud computing, data storage, etc. is expanding globally. While the economies of the world may be slowing at the moment, the use of technology is a long-term trend that will continue for years to come. With a market cap north of $500 billion, Apple will continue its monstrous growth. There is some tough competition, as there always is in the technology world, but Apple's innovation is top notch. Tim Cook has the vision and the team to carry forward the success that Steve Jobs started. With much anticipated future products like the iPhone 5, the rumored smaller iPad, and the mysterious iTV, I don't see why you wouldn't own the stock. With the success Apple has had in the past, I don't doubt that they will come out with more and more amazing products.

    The numbers were derived from the Apple F3Q12 conference call.

    Disclosure: I am long AAPL.

    Tags: AAPL, long-ideas
    Jul 25 12:20 PM | Link | Comment!
  • Alzheimer's

    JNJ, PFE, ELN shares down on failed Alzheimer's drug

    Jul 24 9:59 AM | Link | Comment!
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