Stocks to round out the portfolio
We have ~$43.5K in cash right now. I continue to like energy stocks and semiconductor stocks.
ENERGY
I haven't seen a good alternative energy play. I think that solar is actually a great place - there are square miles of rooftops on commercial buildings (airports, shopping centers, and so forth). But for now, it is still talk. And most alternative enrgy companies do not have solid numbers.
HIGH TECH
I noticed the following PEG ratios for select semiconductor companies:
TRID 0.82
ZRAN 0.99
RFMD 0.96
BRCM 0.94
MRVL 0.79
NVDA 0.87
As a reminder, PEG Ratios are the ratio of the P/E versus the growth rate. In general, companies trend towards a P/E of 1. The reasons are basic math. In the days of dividends, the expectation was that an investor would expect to recover the investment in 10 years. That drove stocks to an average 10 P/E. Some stocks grow fast, and return that investment faster.
This is my theory, but it seems to hold true. The market uses 10 years as a constant, so a fast growing stock will get a higher P/E. In that way, the 10 year mark is held constant. The P/E and the expected growth rates must also balance out to keep the 10 year constant. That is why the PEG tends towards 1.
The key mystery factor is the G in the PEG. The P/E is known. The future growth is estimated. For small cap stocks especially, there aren't many analysts covering the stocks so the G can be incredibly off. MSN and Yahoo will report the PEG but use it with a grain of salt. One way to check is to look at analyst estimates and consider the range. A good rule of thumb is that, for companies reasonably covered and less prone to surprises, analysts fall within a range of <20%. For more mature companies, the range is even less.
GOOG 20%
CSCO 10%
So, when the PEG is <1, that often indicates an oversold stock. In this case, it looks like quite a few semiconductor companies are not valued as highly as their growth justifies. So either the market doesn't expect the growth to be as high as the analyst's expect, or it's an oversold situation. I think the semiconductor companies are oversold and that the Fall will see sector rotation piling back in.
STOCKS
Diamond Offshore Drilling (DO)
Zoran (ZRAN)
WIRE
Ensco (ESV)
GRP because it has been beaten down (otherwise I'd buy TTI)
ENERGY
I haven't seen a good alternative energy play. I think that solar is actually a great place - there are square miles of rooftops on commercial buildings (airports, shopping centers, and so forth). But for now, it is still talk. And most alternative enrgy companies do not have solid numbers.
HIGH TECH
I noticed the following PEG ratios for select semiconductor companies:
TRID 0.82
ZRAN 0.99
RFMD 0.96
BRCM 0.94
MRVL 0.79
NVDA 0.87
As a reminder, PEG Ratios are the ratio of the P/E versus the growth rate. In general, companies trend towards a P/E of 1. The reasons are basic math. In the days of dividends, the expectation was that an investor would expect to recover the investment in 10 years. That drove stocks to an average 10 P/E. Some stocks grow fast, and return that investment faster.
This is my theory, but it seems to hold true. The market uses 10 years as a constant, so a fast growing stock will get a higher P/E. In that way, the 10 year mark is held constant. The P/E and the expected growth rates must also balance out to keep the 10 year constant. That is why the PEG tends towards 1.
The key mystery factor is the G in the PEG. The P/E is known. The future growth is estimated. For small cap stocks especially, there aren't many analysts covering the stocks so the G can be incredibly off. MSN and Yahoo will report the PEG but use it with a grain of salt. One way to check is to look at analyst estimates and consider the range. A good rule of thumb is that, for companies reasonably covered and less prone to surprises, analysts fall within a range of <20%. For more mature companies, the range is even less.
GOOG 20%
CSCO 10%
So, when the PEG is <1, that often indicates an oversold stock. In this case, it looks like quite a few semiconductor companies are not valued as highly as their growth justifies. So either the market doesn't expect the growth to be as high as the analyst's expect, or it's an oversold situation. I think the semiconductor companies are oversold and that the Fall will see sector rotation piling back in.
STOCKS
Diamond Offshore Drilling (DO)
Zoran (ZRAN)
WIRE
Ensco (ESV)
GRP because it has been beaten down (otherwise I'd buy TTI)
posted by Andrew at
4:21 PM
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