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business newsSearching for Opportunities on Egypt Sell-Off
Six tech stocks currently showing potential: PMC Sierra, Infinera, Sandisk, Google, Max Linear, and Blue Coat Systems.
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So many ideas amongst the indiscriminate selling. Looks like we have a no-uptick, low-volume summer Friday today in tech land. But it's the winter, volume probably isn't that light and we're in the middle of EPS season.
One thing remains and that is we don't have an uptick rule. Many may have forgotten this but not me. And that means we can experience very rapid cascade-type selling in stocks whether the news is good or not. Especially when some geopolitical news erupts and the bull market has been throwing bears off its back with abandon. I don’t think Egypt is going to cause the global sales of iPads (AAPL) to decline, enterprise growth of cloud apps to slow or record amounts of cash per share on hundreds of stocks I follow to evaporate. However, this is also the trading framework that creates opportunities and I'm looking at several today:
First are my remaining hedges. I will use today to cover some more but I'm going to wait for a bit to see if we can find a support area or some stability. As written, I had been expecting some corrective action and had been a little early. Today it's sharp and fast and we could rebound off this selling quickly as well. I don't overly try to project this type of action, just to be ready for it and opportunistic.
PMC Sierra (PMCS) -- I didn't see anything in the report for the stock to be down this much. That said, the market has dropped 40 more (from down 30 this morning) on the Naz and PMCS hasn't dropped anymore. I like that type of action. Also, PMCS is producing double-digit growth quarters now with regularity and I think the full-year growth will still accelerate over the current 15% just produced. All this and the stock is selling less than three times net cash while free cash flow production is improving.
Infinera (INFN) -- My subscribers added INFN this morning. Worse quarter than PMCS for sure but still not that bad especially given that it’s INFN, which has little to no reporting consistency. I neglected to mention earlier that it's now selling in the 2 to 2.5 times net cash range, which is just cheap in any market and very cheap in our current backdrop.Sandisk (SNDK) -- Market action today has me holding firm but the report was such that the stock could just as easily be up 10% as down that amount. I may swap some ProShares UltraShort QQQ (QID) for this name later today.
Google (GOOG) -- Maybe the best buy of the companies that have reported so far. The failed breakout occurred right around the $642 level. I expect that that level is the next key resistance and will not hold. After that it's in my NRZ (no resistance zone) and I'm not sure how high the stock can ascend to on the next major up leg. More on that later as I'm penning a thesis piece on GOOG.
Max Linear (MXL) -- This name has sold off quite a bit since I trimmed part of this trade in the mid $12s. Under $11 has me looking closely again.
Blue Coat Systems (BCSI) -- Might Hewlett Packard (HPQ), Qualcomm (QCOM) or even Microsoft (MSFT) come a knocking? We have seen little M&A in tech of late. I expect it to start heating up again and premiums are on the rise.
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