Valuations are lower than they were a year ago, but are still high historically, which is not exactly a good sign. Yet there is a silver lining to this gloom – and Ceragon Networks (CRNT) is a BUY, says Philip MacKellar, editor of Contra the Heard.
Economic analysts, economists, and consumers generally agree that a contraction is in the cards. With good reason: An inversion in the bond yield curve is one of the more reliable indicators of an economic downturn. The deeper, longer-lasting, and more geographically widespread it is, the worse the ensuing slump tends to be. The current inversion has been deep and long, and has been observed in many other countries besides Canada and the U.S.
But the silver lining is that it is often better to buy when the economic news is getting worse. It is also rare for indexes to weather two significant annual drawdowns in a row, much less back-to-back annums where the benchmark loses more than a fifth of its wealth. Note also that the third year of the presidential cycle is often the best for stocks.
Now let’s talk about Ceragon. Any time you see “Networks” in the name, do you think of tech? In this case, you would be spot on.
Headquartered in Israel, it does business around the globe. It is a leader in the 5G field, and as countries sour on China and Huawei, it stands to benefit. It reminds us of Bel Fuse (BELFB), in that its chart is best described as spiky.
Unlike BELFB, however, we are not counting on a quick win, in part because Ceragon has a history of dilution and minimal earnings power. It is a possible takeover target — Aviat Networks tried to buy it twice in 2022, and it would come as no surprise if they came a-courtin’ again. Or, dare we imagine, one of the heavyweights, like Nokia, Cisco, or Ericsson.
Recommended Action: Buy CRNT.
