August Press On Research Pick Out Tomorrow
The August Press On Research pick is out tomorrow. And below is an unfinished excerpt from the issue.
We Can Buy This Company For Free
By Just Paying For It’s Cash
By Jason Rivera
Press On Research Volume 1 Issue 5
On two islands a small tech company is providing some of the biggest names in the tech world with necessary services most of us never think about.
When we think of tech Intel’s (INTC) microchips and processors. Google’s (GOOG) search engine and Android. Microsoft’s (MSFT) operating system. And Apple’s (APPL) phones, tablets, and other gadgets come to mind.
If not new tech like of Facebook’s (FB) or Twitter’s (TWTR) social networking does.
The tech industry is rarely on the minds of value investors as an industry to research though.
Most of us stay away from it. This is because of how fast things change in the industry.
And value investors love to invest in stable companies and industries.
But today’s recommendation isn’t in the tech hardware, software, or app businesses. It’s in a stable industry. And the service it provides is necessary for industry giants.
Not only does it meet my strict criteria for valuation, safety, and quality. But one of the biggest and best value investors in the world owns a significant portion of the company.
I don’t research any company based on other prominent value investors owning portions of them. But when I read in financials that a prominent value investor owns a company I’m considering recommending it’s always something I love to see.
And I’ve invested alongside this prominent value investor one time before…
That time led to a 50+% gain for the portfolios I manage.
The last time it was a ~$20 billion company going through a special situation. The company had great margins. A lot of cash. A lot of debt. And was undervalued by a substantial margin to my conservative valuations.
This time it’s a ~$450 million company that has great margins. Its margins are even better than its bigger competition. More cash than the company’s current market cap. And it’s undervalued by a substantial margin to every one of my conservative valuations.
But before I tell you what the company is I need to tell you how it does business.
Handle With Care
When thinking about deep value investing in small caps. The last companies you consider are high tech companies.
Technology changes so fast that it’s hard to evaluate high tech investments as a deep value investor. Because deep value investors like stable, safe, businesses.
Most of the time value investors stay as far away from the tech sector as possible.
But there is another side of this industry most people don’t even know of. And this is where our recommendation today does business.
Companies who build parts that go into computers have to make sure their parts work well once manufactured. And since most of these hardware manufacturers have their assembly lines set up to make the chips, processors, and memory. They have to outsource the testing of their products to third parties
Without third party specialists like our pick today testing and packaging products. The part and product manufactures would have to test them in house. And would have to take money away from R&D that would have to be put towards expensive testing and assembly equipment.
Not only does this outsourcing save the tech giants and manufactures money and time. But it also brought to life an entire specialized packaging, testing, and assembling industry.
Combined this industry does billions of dollars worth of work. And saves the tech giants billions of dollars by letting other companies buy the expensive equipment to do these specialized processes.
To see what this company is. And what the other four Press On Research picks have been. You can subscribe here.
And remember that free Value Investing Journey subscribers get a 50% discount on their Press On Research subscription.