Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Apple Inc. (AAPL), Nam Tai Electronics, Inc. (NTE), Jabil Circuit, Inc. (JBL) & A Sneaky Way to Play This Boom

The electronics manufacturing services (EMS) industry is not that popular among the general investment community. The technology industry tends to be sensitive to economic cycles, so, getting into this sector when the economy is getting out of recession is the perfect time to invest. Let’s dig in to find some gold!

Nam Tai Electronics, Inc. (NYSE:NTE)

First, we’ll take a look at Nam Tai Electronics, Inc. (NYSE:NTE). The stock appreciated over 160% in 2012, thanks to the 118.6% year over year increase in revenue driven by the ramp up of the production of high-resolution liquid crystal display modules (LCMs) for tablets, and the commencement of mass production of high-resolution LCMs for smartphones.

Gross profit increased a whopping 449.4%. While it is unlikely the company will be able to generate the same stellar returns in the coming years, but is it still a good investment?

Slow yet steady growth ahead

The company reported that its profit margins will be under pressure this year due to increasing competition. But, this short-term headwind will be offset by increased capacity utilization. Despite the massive year over year jump in revenue in 2012, the average capacity utilization for the last quarter in 2012 was under 30%.

As the EMS industry grows, the business for the company would increase, due to which management expects to reach full capacity utilization in 2013. The company currently has a turnover capacity of $3.6 billion annually. Even if we assume an operating margin of 5.6%, moderately less than its current margin of 6.69%, it would still result in an income of over $200 million.

Healthy cash levels and appealing dividend

The company’s cash position is very strong. As of December 2012, Nam Tai Electronics, Inc. (NYSE:NTE) recorded $363 million in total stockholders’ equity, $158 million in cash, and only $13 million in debt. The company has a robust dividend yield of 4.6%. So, that’s a huge positive for long-term investors to earn a decent return.

The company has a forward P/E of 8.54, which makes it undervalued for a company which has robust growth opportunities ahead, one of the best operating margins in the industry, a strong balance sheet, and an above average dividend.

Down but not out

As a soon as a company reports numbers below estimates and issues a weak guidance, bears come rushing in and push its stock to oversold levels as if one earnings miss means the end for the company. Fortunately, it provides amazing opportunities for value investors to buy fundamentally sound stocks at a great bargain price.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.