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ONNN looks strong going into 2010 and beyond

|Includes: ON Semiconductor Corporation (ON)

ONNN in particular is doing very well and recently reported it is having problems keeping up with demand. Sounds like a good problem for a Technology company. They continue to gain market share in PCs, notebooks, desktops, and automotive markets. With new designs in the mobile area, they can get some penetration in mobile phones going forward.

Also, I like the LED technology prospects, especially with it saving energy. The business is divided up into five segments which include: Displays  (PC’s, TV’s, monitors), Illumination, Signals & Signs, Mobile Devices, and Automotive. This industry is a fast growing segment of the economy. According to BCC Research the global shipments of LED Backlighting should grow by 66% from $0.9 billion to about $1.5 billion by 2014. With cost improvements in the illumination industry, the global shipments for illumination should more than double from $0.5 billion in 2009 to an estimated $1.2 billion in 2014.

Today when I checked the stats on Yahoo to see how cheap it is. ONNN has a PE of about 10 compared to 15 for its industry group. If you use the 2011 earnings projections of 0.96, it is at a PE of about 8.44. With earnings growth of 18.5% projected from 2010 to 2011, that puts the PEG at just .54.  Giving it a multiple of 18, you can calculate target prices of 14.58 for 2010 (18 x .81) and 17.28 for 2011(18 x .96). Today the stock was trading around 8.10 per share.

Not to be a pig, if I do get a significant gain by summer I will trim the position to half.

Disclosure: Long ONNN