Nam Tai Electronics, Inc. (NTE), Encore Wire Corporation (WIRE): Are These Electronics Stocks Shorted Out?

Page 1 of 2

The world of small-cap electronics stocks is a violent one. Being cyclical and prone to revolutions every few years, Moore’s Law isn’t the only thing every manufacturer has to be leery of. But the volatility that gives you the risk of these small stocks blowing up in your face also gives them the kind of fuel that occasionally builds 10-baggers.

Nam Tai Electronics, Inc. (NYSE:NTE) manufactures and designs for original equipment manufacturers (OEMs) for consumer goods. But what makes Nam Tai Electronics, Inc. (NYSE:NTE) special? For one thing, consistent financials. Nam Tai’s been rocking solid free cash flow over most of the past decade. Through the Great Recession, Nam Tai Electronics, Inc. (NYSE:NTE) held together reasonably well despite its small size and relative obscurity. I also like how the company is trading for only 1.7 times its book value and around 9 times its trailing earnings.

Nam Tai Electronics, Inc. (NYSE:NTE)

However, I have to caution you against getting too excited. Nam Tai Electronics, Inc. (NYSE:NTE) has traditionally paid reasonable dividends, often in the 10% range. Right now that dividend is 4.3%, which is only special in a company with a $600 million market cap that pulls 5.8% profit margins because it isn’t particularly stable. While I love getting paid to own a stock, Nam Tai’s traction to continue paying a dividend is shaky even on a good day. As the economy recovers I’m sure it will do fine, but you can do better.

Encore Wire Corporation (NASDAQ:WIRE) is all about wire. As construction cooled, the need for cable and wire fell off. It hasn’t exactly helped that commodity prices are jacked up. Because of this pressure from both sides, Encore has been squeezed to within inches of its life. For a company with less than a $700 million market cap that only pulls 1.8% profit margins, it’s a hard knock life indeed. I’m not even sure why Encore bothers paying a .2% dividend.

Unfortunately, I don’t have a lot of great things to say here. Encore Wire Corporation (NASDAQ:WIRE) is trading at a fairly average 1.6 times book value and a very steep 34 times earnings. So would you rather pay half that much for a company in a less stressed industry, or hope that you’ll get back your money in about 15 more years when the next probable housing boom occurs? Encore may be doing a fine job, but it’s essentially keeping a bonfire lit during a hurricane — a possible but miserable task. I’d stay away from Encore for a while.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

The 10 Biggest Outlet Malls in USA

The 5 Most Popular Rap Songs of All Time

The 10 Countries that Eat the Most Meat

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!