The $800M market cap maker of networking equipment is on a long road back, trading as high as $410 in the Tech Bubble, and as low as $1.69 in the March lows. Shares are now trading at $12.22 and breaking out of an inverse head and shoulders, implying we could see a move North of $20 by 2012, a solid 66% gain. The pattern is a bit sloppy, but it still implies a major reversal move.
The Aerospace/Defense Sector is hot and the stocks are breaking out. As a group of the 25 stocks that trade 100,000+ shares a day with a market cap greater than $300M it is one of the cheapest groups on valuation as well, here are some stats on the average company metrics:
Forward P/E: 13.5X; Price/Sales: 1.3X; Price/Book: 2.6X; Price/Cash: 13X; Price/Free Cash Flow: 20.9X; EPS Growth this Year 10.7%
There are some great individual value plays here, names that are lesser known like Esterline (ESL) and Triumph Group (TGI).
Here are a few of the charts I like in this group, break outs with a lot of upside:
BE Aerospace (BEAV), Boeing (BA), General Dynamics (GD), Goodrich (GR), L-3 (LLL), Northrop Grumman (NOC), Orbital Sciences (ORB), and Raytheon (RTN). Lockheed Martin (LMT) is the noticeable laggard.
Starting off 2010 the markets had a rough January, losing around 4% on the S&P, often a bearish indication for the year ahead, but BioTech large caps are seeing a resurgence. Breakouts are developing in Amgen (AMGN), Cephalon (CEPH), OSI Pharma (OSIP), Gilead (GILD), Genzyme (GENZ), Acorda (ACOR), Biogen (BIIB), Dendreon (DNDN), Talecris (TLCR), Regeneron (REGN), and United Therapeutics (UTHR).
An FDA approval of Auxilium’s (AUXL) XIAFLEX today could also keep the bullish tone for the group.
One laggard has been Onyx (ONXX), so keep an eye on that one.