We have found yet another industry where good buys can be had, even in the current tumultuous market. Zacks senior equities analyst
Ken Nagy, CFA assisted us in out search by talking about Garmin (GRMN) and Varian (VSEA), a couple of his Buy-rated stocks in the semiconductor industry.
Have you published any Buy reports lately? If so, which ones?
Garmin, Ltd. (GRMN) is an original equipment manufacturer (OEM) of navigation and communication equipment that incorporate global positioning system (GPS)-based technology. Its end-product markets include marine, recreation, automotive and aviation.
The company's diverse portfolio of handheld, portable and fixed-mount GPS-enabled devices provides geographical location and navigation data using the GPS satellite system. The GPS system consists of a constellation of 24 orbiting satellites and ground monitoring stations that are controlled and maintained by the U.S. Department of Defense (DoD). A GPS receiver can calculate accurately any worldwide position within 10 meters or less.
Would you consider this stock a growth play?
Well, I will say that all segments were up double-digits in 2007, and are expected to be up again in 2008. Pricing pressures continue to intensify, though, negating some of the growth in units. But we see increasing revenue and gradually decreasing profitability for the company.
However, being a market leader, the company should fare better than most of the other smaller players. Consequently, we view the declining share price as an opportunity to accumulate shares.
What's your forward outlook for the GPS market overall?
The handset market is likely to be the largest driver of GPS sales in the next few years. According to an iSuppli report, GPS-enabled mobile handset shipments will grow from 109.6 million units in 2006 to around 444 million units in 2011. In 2006, 11.1% of all handsets were equipped with GPS functionality. iSuppli expects this percentage to increase to 30% by 2011.
Was there another Buy rec issued recently on a company in your coverage?
Varian Semiconductor Equipment Associates, Inc. (VSEA) is a supplier of ion implantation equipment used in the fabrication of semiconductor chips. Varian Semiconductor designs, manufactures, markets and services semiconductor processing equipment for virtually all of the major semiconductor manufacturers in the United States, Europe and Asia Pacific.
Varian has superior technology and remains several product generations ahead of competitors. As nodes transition to 90 nanometers, VSEA remains the strongest solution for ion implementation. Consequently we reiterate our Buy rating of the shares of VSEA and set a price target of $45.00.
NOTE: This interview was previously published on Zacks.com. Ken Nagy, CFA covers the semiconductor industry for Zacks Equity Research.
