Many tech stocks are struggling under the weight of the trade war between China and Washington. The major indexes notched all-time highs in July and then backed off again in August and September, mostly pushed around by international trade uncertainty. Many investors are sitting on their hands, frustrated about the generally sideways market trend since the trade tensions started in 2018.
Others are rubbing their hands in excitement, as some genuinely excellent businesses are trading at ridiculous discounts. Here’s why I think this would be a great time to invest in…
The overseas consulting powerhouse
India-based consulting giant Infosys has taken a 10% haircut over the last month. The stock is trading at an affordable 18 times forward earnings.
In last week’s second-quarter earnings report, Infosys saw sales rise 10% year over year, led by 38% growth in the digital consultancy division. Earnings held steady at $0.13 per American depositary share. Some analysts raised their price targets based on this report, while others lowered them — but even the negative moves were made by bullish firms that still have buy ratings on the stock.
This company is deeply involved in the explosion of technology assets in the evolving automotive industry. Recent wins include a large contract to deliver digital services in Volvo cars. Infosys is also helping a Toyota subsidiary set up an Internet of Things-based telematics system.
That’s a high-quality business tied to a bargain-priced stock. And you don’t even have to worry about American tariff actions because Infosys operates from Bangalore, the tech-packed Silicon Valley of India.
The reformed electronics manufacturer
If Infosys gets to bypass the Chinese-American trade dispute, Nam Tai walks right into it. The company owns 2.9 million square feet of leasable space in an old electronics manufacturing plant in Shenzhen, China. Nam Tai is also developing two more sites in the same thriving technology hub, adding another 2.1 million square feet in 2021 and 1.8 million in the last phase, set to open in 2025.
This company has been assembling electronics for decades but is now shifting into more of a property manager mode. Some manufacturing will still happen on these redeveloped sites, but Nam Tai is focused on a broader innovation theme now. The three hubs known as Inno Park, Inno Valley, and Nam Tai Technology Center will also feature lots of office space and residential developments aimed at business managers and salaried engineers. That’s a far cry from the murky housing Shenzhen’s electronics manufacturing centers have been known for, and a good fit for the city’s own rebranding efforts.
Nam Tai’s stock price has fallen 11% in the last three months. It’s not a cheap stock by most traditional measures, because Nam Tai Property is just getting off the ground with its new property management operations. The company posted a $7 million net loss last quarter on top-line sales near $0.8 million. Just give it some time to set up and lease out those innovation-oriented Shenzhen properties.
This stock currently trades just 8% above its 52-week lows but 17% below annual highs. Nam Tai is not an investment for the faint of heart, but patient shareholders should see solid returns from this deep, dark trough…
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