By J. Royden Ward, Editor of Cabot Benjamin Graham Value Letter
From Cabot Wealth Advisory 12/27/12 Sign up for free Cabot Wealth Advisory e-newsletter
I recently scoured my databases to find the best companies with low P/BV ratios. I found that 140 companies in my database of 1,000 companies have P/BV ratios of 1.20 or lower. I used several additional criteria to narrow the list of 140 companies by also requiring: Standard & Poor’s Earnings/Dividend ratings of B or better, low price-to-earnings (P/E) ratios, dividend yields of 1.0% or higher and good earnings prospects for the next 12-month and five-year periods.
My search turned up a couple of companies with storied pasts. Both companies had spectacular rises in years past before collapsing when new technologies passed them by. The companies have reinvented themselves and could become industry leaders again in just a few years. The stock prices of the two companies are bargains now and the companies look attractive to me. The stocks are Xerox and Corning.
Corning (GLW), founded in 1851 with headquarters in Corning, NY, evolved from an old-line housewares company to a leading maker of liquid crystal display (LCD) panels, fiber optic equipment, and emission control equipment.
Corning is operating in several leading growth sectors: making glass for flat-screen TVs, smartphones, tablet computers and other electronic devices; manufacturing fiber optic equipment used by the telecommunications industry; and developing pollution control equipment to meet new emission standards.
I expect sales to increase 6% and EPS to climb 7% in 2013 and accelerate in 2014 and beyond. New products, such as Gorilla glass which is extra strong and clear, and ultra thin Willow glass could easily push sales and earnings higher than expected.
GLW shares sell at a 14% discount to book value, sport a low current P/E of 9.8, and provide a dividend yield of 2.9%. The company’s balance sheet is very strong with $4.25 per share in cash and low debt. GLW’s stock price will likely almost double within one to two years.
I will continue to follow Corning and other blue-chip, high-quality investments in my Cabot Benjamin Graham Value Letter.
Editor's Note: You can find additional stocks selling at bargain prices in the Cabot Benjamin Graham Value Letter. In every issue, you’ll find my legendary Maximum Buy and Minimum Sell Prices for over 250 stocks plus my up-to-date predictions for the Dow Jones Industrial Average. Click here for more information.
From Cabot Wealth Advisory 8/19/10 Sign up for free Cabot Wealth Advisory e-newsletter
Market watchers speculate that a key component of the wildly successful iPad actually got its start in the 1960s as a way to solve the problem of Ma Bell’s phone booth glass being shattered by vandals. That market fizzled, regular glass being much cheaper, but the product was revived when executives saw a market in the smart phone revolution.
The product is called Gorilla Glass, and Corning (GLW), the venerable upstate New York firm that has been thriving on fiber optics and liquid crystal display glass, makes it. The story with Gorilla Glass, true or not, is that in the early 1960s, one Corning executive quipped to another “The problem with glass is that it breaks.” The other replied in seriousness, “Why don’t you do something about that?”
The result was Chemcor, a glass that was hardened in a proprietary, environmentally friendly method developed by Corning that made it very hard to break, scratch or puncture. Back then, the company was so proud of it they sent films of scientists trying to break Chemcor glass to television stations around the country. But no one bought it.
Revived and tweaked and re-introduced to the market late last year under the more marketing-friendly name Gorilla Glass, it can be produced to be thinner than a dime, while being resistant to cracking when dropped and not losing effectiveness after long periods of touch screen usage.
Corning so far has 19 customers for Gorilla Glass, most of which it cannot name because of non-disclosure agreements and presumably Apple is in that group. We do know the popular Droid smart phone uses Gorilla Glass, as well as Dell, Samsung (which also supplies some iPad components) and LG, among other companies.
Regardless of whether Apple uses Gorilla Glass or some alternative, so far this year, Gorilla Glass sales amounted to $250 million in the first two quarters for Corning. Many analysts, myself included, believe Gorilla Glass can be a $1 billion business in 2011 thanks to both smart phones and touch screen markets, as well as a planned rollout of ultrathin, stylish flat panel televisions with what I think will be a compelling feature—because Gorilla Glass is so tough, TVs will be made without frames.
Corning’s other businesses have been doing well too: LCD glass sales have held up better than anyone expected (and the Cabot Green Investor portfolio made a 15% profit on Corning last year having correctly seen that LCD TV sales were holding up); environmental products, primarily ceramic substrates, have grown strong double digits this year. To boot, for those with a strong inclination to Green stocks, Corning owns a chunk of Hemlock Semiconductor, one of the world’s largest suppliers of polysilicon, a primary solar panel material. Corning, at 17 a share, sports a price-to-earnings ratio of just 9, a bargain. My subscribers added it Friday.
To learn more about Corning and other top Green stocks, click here: Cabot Green Investor.
Analyst and Editor of Cabot Green Investor
Brendan Coffey is a member of the Cabot investment team and editor of Cabot Green Investor. A veteran financial journalist, Brendan has spent more than a decade writing about investing for publications including Barron's, Forbes, The Wall Street Journal and a number of private-client brokerage newsletters.
One Riverfront Plaza
Corning, New York 14831
|Index Membership: S&P 500, S&P 1500 Super Comp |
Industry: Communication Equipment
Full Time Employees: 23,500
8/19/10 Corning (GLW): Venerable upstate NY firm is thriving on glass for new electronics