Markets are now in their Santa phase. Expect rallies with brief interruptions for consolidation or p...
11/18/2005 12:00 am EST
"RSA Security (RSAS NASDAQ) specializes in security user identification, authentication, and secure remote access to enterprise networks. Not at all a small player in this segment, the company secures more than 15 million user identities, safeguards trillions of business transactions annually, and has 19,000 customers worldwide. Security continues to be a timely topic and a high growth segment within technology, which is part of the reason why we continue to like the company.
"This is a perfect example of a stock that has been unfairly punished. Just a couple of weeks ago, the company announced preliminary third quarter results that were mysteriously not well received and the shares fell almost 8% on the news. D own more than 50% from its 52-week high, RSA has no long-term debt and more than $4.00 in cash per share. Although the present price to sales ratio of 2.5 and trailing-12-month P/E ratio of 22 are not cheap on an absolute basis, the net-of-cash valuation is very attractive and the multiples are at a discount to historic averages. We view this latest price drop as a buying opportunity and secure shares up to $12.14."
"Symantec (SYMC NASDAQ) took a large hit after the company said it had produced ‘solid’ earnings but investors found the outlook anything but. The quarter suffered from a late introduction of consumer-oriented Norton PC security products, little high-profile virus threat activity, and competitive pressures. Symantec says it won't compete on price in the consumer space. That's good, because we believe the company's brand power will go a long way toward fending off potential competition from new competitor Microsoft and existing foe McAfee.
"No doubt, Symantec faces a minefield of competitive threats going forward, but is entering the fight battle-ready. With what we believe are top-notch data protection, storage management, and security products—all of which should synergistically begin to sell each other in many ways— Symantec has a product portfolio many likely envy. Plus, the balance sheet contains about $3.78 per share in cash and equivalents, after which the stock trades at 15 times trailing earnings. So despite the near-term turmoil, we look for continued growth. We are buyers up to $20.06."
At worst the tax cuts will validate current market valuations, says Tom Essaye. At best they’l...