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Stocks for a Bandwidth Constrained World: Ciena, Harmonic


Ciena and Harmonic have very solid balance sheets and cash flow generation is improving each quarter currently.

Sometimes the lull between earnings reporting periods is the best time to focus on stock research and dust-off last quarter's reports for companies that fit investment themes of interest.

Ciena (CIEN) and Harmonic (HLIT) are examples of finding good investments ahead of the next round of reports.

CIEN is a break-out stock currently, with a very strong technical pattern. Aside from one real weak day, the stock has held quite well during the last two weeks' powerful decline. It also bounced very, very well off its two biggest down days.

If you want a fundamental reason behind the move, listen to Ciena's last conference call. If you want better fundamental reasons listen to the last quarter calls from Google (GOOG) and Verizon (VZ). There is much more evidence to believe that CIEN will keep moving higher but these examples are the best in the recent past. Technically the stock is consolidating recent gains and looks poised to break its January 2004 highs.

Harmonic is benefiting from many of the same catalysts and reports mentioned above, but the stock broke down after its last report. However, the break-down stopped quickly and the stock also acted well during the swoon. Interestingly, its last quarterly report was counter to the stock action after its report.

If you believe at all that the big moves toward video distribution from Verizon and AT&T (T) will even be modestly successful, then HLIT becomes an easy stock to own.

Both stocks have very solid balance sheets and cash flow generation is improving each quarter currently.

CIEN and HLIT both show a very similar bullish pattern on Point and Figure charts. See the charts below. New to PnF charts? Professor Depew has written a great tutorial on the subject. Click here to read Point and Figure Basics.

Click here to enlarge.

Click here to enlarge.

HLIT may be a better buy at current prices while CIEN looks to be a better buy on any moderate pullback.
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Position in GOOG, CIEN and HLIT.

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