A Tech Stock That Isn't Apple
Since Apple is now the biggest company in the world by market capitalization, buying a tech stock that isn’t Apple means it is, at least compared to AAPL, a small cap. And Ingram Micro (IM) definitely qualifies as a small cap, with only a $2.2 billion market cap (a piker by AAPL standards!). Yet it is also the world’s biggest wholesale distributor of computer products and related services. Its revenues were a tad over $36 billion in 2011. Not exactly a bite of the old Apple, but if forced to take, say, 1/100 of 1% of that, I’d do it.
I think of IM as a proxy for worldwide consumer and business electronics consumption. The company distributes through some 170,000 resellers in more than 100 countries. Over the past decade, they’ve increased revenues by 65%, cash flow by 94%, and earnings per share by 253%. Their book value went from $10.85 to $21.89 (more than $5 more than its current price.)
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However, when the roll call is taken among tech stocks these days, it goes something like this: “If your name is Apple, please move over here to the Unbridled Accolades Section. Everyone else, pay homage.” That takes nothing away from Apple, whose products I love, but come on — Ingram Micro’s earnings shot up by roughly the same amount its PE contracted (from just under 30 to just over 10).
Even in a market I don’t much care for, I have to say that a company selling for a PE of 11 at a 25% discount to book value, and one that is still growing with a nice moat due to its size and existing relationships, is definitely worth a look.
The company’s financial strength doesn’t rate high on the Altman Z-Score scale. Still, it resides in the “gray” area like so many other, much larger, firms, and it is net-net debt free. At these prices, the company is selling below its low for 2011, hardly a banner year from a stock price or scintillating market perspective. The consensus estimates for 2012 hover around $1.84, at which price the company would be selling at 8.3x earnings.
If you think consumer and business computing and electronics might continue to increase our productivity and therefore might still be a growing industry, I think Ingram Micro is a nice “denims and pick-axe” way to play that otherwise volatile sector.
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