Palm has hit its bottom. Stocks hed: dek:
One of the best sources for raw stock data is Interactive Week’s @ 100 list, a stock index of the magazine’s “top 100 Internet-related companies.” An easy way for bargain hunters to find potential bargains is to look at the difference between the 52-week high and the most recent price for stocks on this list. A quick glance of the list will give you a good idea of how deflated many stocks are. If you believe that the survivors of the Internet shakeout will only grow in value in the future, as I do, you should be able to find several bargains from which to choose at any given time.
Of course choosing the right stock to invest in is more complicated than simply comparing a stock’s 52-week high to its current price. But once you have a list of candidates, you can narrow it down based on other factors, including how long a company has been around, its financial data, its R&D profile, and especially the market for its products.
An example of one of my losers is Akamai (NASDAQ: AKAM), which was trading at less than one third of its 52-week high, or nearly $100 a share, when I added it to the CU fund last year. I learned my lesson about Akamai. It had not been around long enough to lend much meaning to its 52-week high data. Its financials were based more on its market cap than on its other assets. Its R&D was too narrow and new to get excited about. And the market for its products and service was uncertain at best. It’s trading at $8 a share at the time of this writing. Ouch.
A good example from one of my winners is IBM (NYSE: IBM). When its stock was at $80 a share, or roughly two-thirds of its 52-week high, I thought it was a good bargain. My reasoning was based on its longevity in the market (the longer a company has been around, the more the 52-week high means), its strong financial reports, its diversified and aggressive R&D foundation, and the growing market for many of its revitalized product lines. It’s trading at $115 at the time of this writing. Yeah.
Looking at the most recent @100 list, I see a startling array of bargain candidates that I could choose from. Here’s a small sample of the companies whose current value is no larger than one quarter of their 52-week high (52-week high/current price): ADC Telecomm (NASDAQ: ADCT) (49/9), AvantGo (NASDAQ: AVGO) (27/3), Ericsson (NASDAQ: ERICY) (23/6), and Palm (NASDAQ: PALM) (67/5). I like all of these companies, and may add some to the CU fund later. But right now I favor Palm in this group.
While Palm will not get near its 52-week high any time soon, it is a real bargain. Though it is relatively new to the market, the company itself has a long history with a fairly solid financials for a company of its age. Its R&D could use a boost; but the real value is in the market for its products. The Palm OS is the undisputed leader in handheld computing platforms. And the long-predicted slip in market share shows no signs of happening. I really don’t think any other platform will make a serious dent in Palm’s leadership anytime soon. Palm may have to adopt some of Handspring’s flexibility and price points if it is going to compete with its upstart licensee on hardware. But Handspring’s strong start only improves Palm’s OS outlook. All in all, I expect Palm to rebound into the teens by the end of this year. After that, I would list Palm a solid long-term play.