Steven Benharris'  Instablog

As a contrarian, my investment style is to find stocks that are beaten up, out of favor, selling at the lower range of their historical valuation levels, and with strong fundamentals. In this post, I'll mention four technology stocks that I find in the technology bargain bin, with only a brief mention of why I find them attractive at or below their current price levels.

Disclosure first: I have recently initiated positions in all four of the stocks mentioned in this post. I step into positions and build positions in a pyramid fashion, adding larger increments at lower prices if I still have conviction that my initial hypothesis was correct. I also trade proactively around positions in an effort to reduce cost basis.

From it's May 2 high of $29.18, Intel Corporation (INTC) is down 23% in just five months. INTC has sold off due to sluggishness in PC demand as iPads with ARM cores, Smart phones, and other mobile devices that don't use Intel chips grab greater market share. At $22.51, INTC is selling at slightly below 10X trailing and slightly above 10X forward earnings and yielding a 4% dividend. Technically, the stock is in a downtrend. Intel's fortunes will be significantly tied to the success of the Atom processor in notebooks and tablets running Windows 8.

Texas Instruments (TXN) has seen almost an 18% drop since it's March 25, 2012 peak of $33.99. AT 20.5X trailing and 13.7 times forward earnings, it is not as cheap as INTC, nor as compelling on a valuation basis, but still has garnered my interest.

Synaptics (SYNA) makes the touchpads, clickpads, and human interface solutions that are in notebook computers, smartphones, and other digital electronic devices. Their products are in more than a billion devices, so you are probably using one. Down from $39.01 on February 26 of this year to $23.70, the shares have been beaten with the ugly stick this year. There is a huge 28.5% short interest in the shares, based primarily on fear of design losses to competitors and the impact of lessening PC demand on their touchscreen sales. SYNA has more than $9/share in cash, nil debt, a 4.2 current ratio, and an enterprise value of ~60% it's market cap. My thought is that a bearish scenario is already reflected in the current share price and the high short interest could fuel covering.

QLGC: The low valuation of QLGC mystifies me. At $10.45, the shares trade at 5X trailing and 10X forward earnings. Furthermore, QLGC has $5.27 in cash and virtually zero debt, so the shareholder is paying just over $5/share for the operation that is projected to earn almost $1 this year (which is a significant decline from last year's $1.39). QLGC has an eye-popping current ratio of 8.12, yet nearly 7% of the float is held short. In July, QLGC missed earnings by a penny and revenues by less than 1%, and the stock dropped intraday 22%. The concern is that weakness in IT spending will negatively impact QLGC, but from my perspective, that seems pretty much baked in to the current share price, and then some. The enterprise value of the company is barely half of it's market cap.

With AAPL accounting for ~ 15% of the NASDAQ 100 index and GOOG accounting for another ~5.5%, much of the gain in the NASDAQ this year has come from the out performance of those two issues, while many other stocks, including the four mentioned in this post, have been laggards.

More disclosure: I have taken positions (long) in all four of the stocks mentioned in this post, and may add to those positions on further price weakness. Do your own due diligence, this primarily a mention of four tech issues, I did not go into detail about the companies or my reasons for initiating positions.

Disclosure: I am long INTC, TXN, QLGC, SYNA.