When I met John Templeton back in 2001 we didn't discuss tech
stocks very much. Given his fondness of shares with low PE
ratios, I imagine he wasn't normally a fan. He expressed some
sadness that nobody had developed a less risky means of shorting
overpriced shares. It might have allowed ordinary investors to
benefit from the tumble in dot-com shares the previous year.
But you know, tech stocks can reach points of maximum
I used YCharts' stock screener to find a few tech concerns
that might have given Sir John pause. I found four high-tech
firms whose shares are trading at intriguingly low
They are QLogic (
), a maker of computer networking gear based in Aliso Viejo,
Calif., Xyratex (
), a United Kingdom-based maker of data storage gear and hard
drives, Power-One (
), a maker of solar inverters based in Camarillo, Calif., and
ManTech International (
), a Fairfax, Va., consultancy that advises the government and
private companies on matters of high-tech security, global
logistics, systems engineering and the like.
These are not big companies, mind you. The smallest, Xyratex,
has a market cap of just $200 million.
QLGC Market Cap
All four stocks have badly lagged the S&P 500 in the past
Alas, now all four are trading at fairly modest
QLGC PE Ratio
Peabody Energy (
), a coal producer hammered by the widespread switch to cheap and
abundant natural gas - an unloved stock, if ever there was one -
trades at a higher multiple than three of these unloved
BTU PE Ratio
Sometimes highly levered companies trade at deceptively low PE
ratios. But debt doesn't seem to be the problem here. None of the
four is overburdened by long-term debt according to our
debt/equity ratio data.
MANT Debt to Equity Ratio
I always like to double-check our debt/equity ratios; I look
at each company's total liabilities and see how high those stand
next to their stock market caps. In the case of these four, their
total liabilities are 13 percent of market cap (QLogic), 62
percent (Xyratex), 50 percent (Power-One) and 75 percent
(ManTech). So yes, there's leverage here, but not toxic levels of
Dividends? Yes, interestingly. Tech companies don't tend to
pay dividends, but two of these four do so.
I surfed around to a few other financial websites to check on
what analysts are projecting for earnings from these four
companies. None of them are expected to generate anything that
resembles the kind of steady climbs in profitability that we love
to see from tech firms. But all four companies are expected to
show a reasonably healthy profit in 2012 and 2013.
If you're hunting around for an unloved technology investment,
one of these is worth further exploration. If you look at their
five-year price charts, you'll see that these tend to be
volatile. The trick is to buy them when nobody else cares to then
remember to sell when they spike later.
Stephane Fitch is an editor for the
YCharts Pro Investor Service
which includes professional