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Reasons To Consider Western Digital (WDC).

|Includes:Western Digital Corporation (WDC)

A few weeks ago, while i was trying to locate some stocks to have, i use the phenomenal FINVIZ screener.

Because this is my first post at "Seeking Alpha", i just want to tell a bit about the way i invest:

The Graham way. To be honest, i used to invest in "Junk bonds" and it went well until it failed. So since the big fall in bonds i started to search for a better way to invest in stocks, so i came up with the "Intelligent Investor" by Ben Graham and I'm trying to read a lot about Warren Buffet way and moves.

Anyway, let's go into it... into the reasons i believe WDC stock could be a good "Buy" stock.

According to the Graham way of investment, i searched for stock which meats the requirements of Graham with bit changes i made to be more "comfortable" with the "Goal".

Those are the parameters i searched for:

  1. Index: S&P500.
  2. Dividend: Positive.
  3. PE: Lower the 15.
  4. Return On Equity: Greater than 15.
  5. Debt/ Equity: Lower than 0.5
  6. Sales Growth in past 5 years: Positive.
  7. ROI: Greater than 15.
  8. EPS Growth this year: Positive.
  9. Current Ratio: Over 2.
  10. P/B: Lower than 2.
  11. EPS Growth past 5 years: Over 5%.
  12. ROA: Over 5%.

It's not a secret: WDC at the higher price since 2006, But as i found out sometimes, it doesn't mean no new high can be reached.

finviz.com/publish/040113/WDCc0ml1147.png

For me, the most important parameter are: PB (1.47), PE (6.1) and the ROE (29.39%). But let's review the full answers of the 12 requirements above:

  1. Index: S&P500. (Yes)
  2. Dividend: Positive. (1.99%)
  3. PE: Lower the 15. (6.1)
  4. Return On Equity: Greater than 15. (29.39%)
  5. Debt/ Equity: Lower than 0.5 (0.26)
  6. Sales Growth in past 5 years: Positive. (17.94%)
  7. ROI: Positive. (24.7%)
  8. EPS Growth this year: Positive. (112%)
  9. Current Ratio: Over 2. (2.16)
  10. P/B: Lower than 2. (1.47)
  11. EPS Growth past 5 years: Over 5%. (21.4%)
  12. ROA: Over 5%. (19%)

I prefer not to got deeply for each parameters, and just make sure if the stock is "Cheap". So i use the Multiple f PE & PB ratios and just make sure it's up to 22.5:

PB (1.47) * PE (6.1) : 8.96

This result is lower by far than Graham Maximum ratio of 22.5.

I don't know why this stock is cheap. That's true. But if make a decision to invest in the market - i must to into account that i have some "Margin of safety:

This can be found by the current "Earning Yield" which is 16.5%. (According to Graham way of work, only if this calculation is doubled than long terms AAA bonds it has a margin of safety.)

The Debt to equity is only 0.26- which is good enough.

Disclosure:

I'm long on WDC.

Disclosure: I am long WDC.

Stocks: WDC