SINLetter – August 2005
This is the first edition of the Suria Investment Newsletter (SINLetter), a free monthly newsletter that highlights two publicly traded companies. The objective of this newsletter is to provide you with unbiased initial research and basic facts about individual stocks so that you can then research them further before deciding to add them to your portfolio or not. Even if you are currently not an active investor, this newsletter will hopefully prove to be a good starting point. If you need to set up a brokerage account, at $5 per trade, Ameritrade Izone offers a good option for inexpensive online trading. Relevant links have been provided throughout this newsletter to point you towards additional information. I hope that you will enjoy reading this newsletter as much as I have enjoyed creating it.
Airspan Networks Inc (AIRN)
Almost all of you have either heard of or used laptops that are equipped with a wireless card. Traditional wireless internet access points that allow you to surf the internet wirelessly have a range of about 150 feet. So after you have had your cup of coffee at the local “wireless enabled” coffee shop, you will loose the wireless internet connection when you leave the coffee shop. Wouldn’t it be great to have access to the same wireless internet connection even from your home, office, airport or library without having to set up a wireless access point at each location? Intel (INTC) and other industry leaders have been working on a new wireless standard called WIMAX for the last few years. Using this new WIMAX standard, it is possible to supply high-speed wireless internet access over a 10-mile radius from a single wireless access point. This is huge news for consumers, governments, companies, tech savvy folks, system administrators and security professionals for a variety of reasons.
Airspan Networks is a wireless equipment provider based in Florida and currently makes equipment that supports the WIMAX standard. Apart from providing wireless access to the internet, WIMAX service can also provide an alternative to DSL or Cable as a source of high-speed internet access. In fact a company called Clearwire is already providing WIMAX based internet access to over a dozen cities across the United States. With large-scale adoption of the WIMAX standard, Airspan Networks could do significantly well in the coming months and years. With no debt, 53 million in cash and a Price/Sales ratio of 2.0, the fundamentals for this company look strong. Like most new high growth companies, they currently do not have positive earnings (Amazon.com did not have positive earnings until just a couple of years ago) and this is reflected in the current stock price of $5.62. Intel has already released a WIMAX chip and you can expect to see WIMAX enabled laptops in 2006. Buying for the long-term when the price dips a little may prove to be a good strategy. The quarterly earnings results are due out on after the close of market on August 3, 2005 and since the company has already warned that sales will be lower than expected this quarter, it will be interesting to see how this stock behaves after the results come out.
A close competitor to Airspan Networks is Alvarion (ALVR) which is based in Israel and also provides WIMAX equipment. Alvarion already has positive earnings and could also prove to be a good investment choice. However with a Price/Sales ratio of 2.57 and a quarterly revenue growth rate of 28.1% when compared to Airspan’s 78.9% growth rate, Airspan seems to be a better option. Companies like Intel, Motorola (MOT) and Nokia (NOK) also stand to gain from WIMAX but are not pure plays like Airspan Networks and Alvarion.
- Strong fundamentals.
- High growth company in an area that has support from industry leaders.
- Wall street has not yet fully “discovered” this company. This can prove to be very beneficial for early investors.
- Negative earnings.
- A large company like Cisco could start making WIMAX equipment.
|P/E||N/A||Long Term Debt||-|
ATI Technologies Inc (ATYT)
ATI Technologies is a company that makes graphics processors and there is a very good chance that the computer you are using to read this newsletter has an ATI graphics processor. Computer gaming requires tremendous resources to render the almost realistic images found in many games today. Gamers and graphic artists usually pay a tidy sum to buy the latest graphics processors released by ATI and its rival NVIDIA (NVDA). This has traditionally lead to higher margins and increased free cash flow for ATI, accounting for much of the close to half a billion dollars in cash that ATI carries on its balance sheet.
ATI Technologies is a classic example of a company that is punished too hard for making a mistake. ATI fell from a price of $20 in November 2004 to below $12 in July 2005. Much of this fall can be attributed to shrinking margins on account of competition from Intel in the low-end notebook market and problems that ATI faced with releasing its high-end R520 graphics processor. Since then the price has rebounded to $13, but it still presents a significant value given the future growth prospects for ATI. The next generation XBOX 360 gaming console by Microsoft which is slated for release before the end of this year is going to use an ATI chip instead of the NVIDIA chip used in the original XBOX. ATI is also making chips for HDTV and has already partnered with JVC. Anyone who has seen the difference between HDTV and regular TV will realize that the growth in this market is just getting started and will likely continue for years to come. With a current Price/Sales ratio of 1.38 and Price/Earnings ratio 16.15, ATI Technologies looks like a bargain when compared to Intel and NVIDIA. Hence ATI Technologies looks like a good buy both for the intermediate term and for the long term.
ATI’s closest competitor is NVIDIA (NVDA) and it has been taking over some market share from ATI in the recent past. Intel (INTC) also presents competition to ATI in the low-end graphic chip market as Intel is furnishing more and more laptops with its own chips instead of using ATI’s chips.
- Strong balance sheet with close to half a billion in cash and very little debt.
- Very low P/E when compared to the industry and other competitors.
- Potential increase in revenue from its HDTV chips and XBOX 360.
- Eroding market share to NVIDIA in the high-end market and to Intel in the low-end market.
- Lower margins and trouble rolling out its latest R520 graphics processor.
|P/E||16.15||Long Term Debt||$28 Million|
Every month we will add the two stocks that are highlighted into a model portfolio started with a cash position of $100,000 on August 2, 2005. To keep calculations simple, trading costs are not included.
|Stock/Cash||Number of Shares||Cost||Current Value||Difference|
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- Suria Investments, Inc. does not comprise any solicitation to buy or sell securities.
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- We suggest you check with a broker or financial advisor before making any investment decisions.