Nam Tai Electronics (NTE)
By Paul Goodwin, Editor of Cabot China & Emerging Markets Report
From Cabot Wealth Advisory 12/4/12 Sign up for free Cabot Wealth Advisory e-newsletter
My stock pick today is a great example of a strong stock that has been doing well despite a weak market. The company is Nam Tai Electronics (NTE), a Chinese manufacturer of LCD display panels and modules for consumer and telecom markets. The company has been in business since 1975, and had a reputation as a well-run, profitable business, but not one that was going to do anything spectacular.
Then Apple entered the picture.
Suddenly, Nam Tai, which had been more of a commodity producer, began booking huge sales of its high-margin LCD modules. The company's Q3 results revealed revenue growth near 200% and earnings growth of 5,200%, up from a penny in Q3 2011 to 53 cents.
Apple never reveals the names of its suppliers, so much of investors' enthusiasm for NTE is conjectural. But it's a pretty well nailed-down conjecture.
Nam Tai is in the process of building new manufacturing space, and management says that the company will shed some of its low-margin business to concentrate on module making. Estimates for 2013 are positively rosy.
NTE has spent years as an up-and-down dividend-paying stock that hadn't traded above 10 since August 2008. But the stock began to gain momentum in August, blowing past 10 on big volume, then spent two months trading in a range between 10 and 12 while investors waited to see what surprises third-quarter earnings would bring. And when that news was good, the stock popped to 15 in a day and has been digesting that gain and moving to new highs ever since.
NTE is hot right now, and that presents challenges for how to buy and how to handle the stock. One strategy is to buy in on one of the stock's downticks, like the one today that took three-quarters of a point off. The other is to take a small position and then add to it if NTE can push past 16 on good volume. In either case, the stock's 4.0% forward annual dividend yield will make it a little easier to ride out the daily waves.
Publisher's Note: Paul Goodwin's Cabot China & Emerging Markets Report is the place to discover the top stocks in the fast-growing international emerging markets sector. To learn about high-potential stocks like NTE, PriceSmart, Melco Crown Entertainment and China Mobile, and the proper way to handle them, click here now.
From Cabot Wealth Advisory 11/6/12 Sign up for free Cabot Wealth Advisory e-newsletter
Nam Tai Electronics (NTE) is a Chinese company with a market cap of about $663 million that is apparently supplying LCD panels and other components for Apple iPads and iPhones. (I say apparently because Apple doesn't like to say where it gets its components from, even when it's an open secret.)
NTE made a nice runup in June and July, then blasted off in August, ripping from 6.5 to over 10 in just two weeks. It then settled into one of the tightest sideways trading patterns I have ever seen, barely pushing its nose below 10 or above 11 through all of September and October.
So when the revenue and earnings news were good—the company raised its quarterly dividend to 15 cents per share, an increase of 114%! NTE had a great base already built up, and investors responded by pushing the stock up nearly 40% in one day!
The stock illustrates the potential strength of Chinese stocks, a group that has been in the doldrums for longer than I care to think about.
But this undervalued group is showing signs of life, and I personally believe that this is the perfect time to start following emerging markets stocks again. The signs are there for the vigilant, and those who get back in before the neon signs go up will reap the benefits.
Editor's Note: To learn more about high-potential emerging markets stocks and the proper way to handle them, click here now. Cabot China & Emerging Markets Report is the place to discover the top stocks in these fast-growing markets.
|Nam Tai Electronics (NTE)
Namtai Industrial Estate
2 Namtai Road, Gushu
86 755 3388 1111
|Index Membership: N/A
Industry: Diversified Electronics
Full Time Employees: 5,206
11/6/12 Nam Tai Electronics (NTE): Components for Apple iPads and iPhones