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Patrick McKeough is one of Canada’s top safe-money advisors. The Wall Street Journal, Forbes and The Hulbert Financial Digest have all recognized his ability to find stocks with hidden value. He is editor and publisher of The Successful Investor, Stock Pickers Digest, Wall Street Stock Forecaster and Canadian Wealth Advisor; inventor of the Quick Profit/Value System and the ValuVesting System™. A best-selling Canadian author, he wrote Riding the Bull, the book that predicted the 1990s stock-market boom.

Buy Aastra, hold on to Trimble

November 19, 2010 -  Be the first to comment
Posted by: Pat McKeough Filed in: Tech Stocks
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TRIMBLE NAVIGATION $35.95 (Nasdaq symbol TRMB; SI Rating: Speculative) (408-481-6914; www.trimble.com; Shares outstanding: 119.2 million; Market cap: $4.3 billion; No dividends paid) makes global positioning system (GPS) devices and technology for four main markets:

1) Engineering and construction accounts for the largest share (55%) of Trimble’s sales.

2) Agricultural GPS products (25% of sales) help farmers cut costs and increase yields. For example, GPS allows for more precise plowing, seeding and fertilizing, even at night.

3) Fleet products (12% of sales) track moving vehicles and time their stops and starts.

4) GPS components (8% of sales) consist of GPS boards, modules, chipsets and technology licences for major customers around the world.

In the three months ended October 1, 2010, sales rose 18%, to $318.2 million from $269.7 million a year earlier (all figures in U.S. dollars). Excluding one-time items, earnings per share rose 56%, to $0.39 from $0.25.

The company’s balance sheet remains strong: it holds cash of $211.1 million, or $1.77 a share. Its $151.2 million of debt is just 3.5% of its market cap. Trimble spends around 11% of its sales on research.

Trimble’s longer-term prospects are bright. But for now it needs a sustained recovery, especially in engineering and construction, to keep improving its results. The stock trades at 28.8 times the $1.25 a share that Trimble is forecast to earn in 2011.

Trimble is still a hold.

AASTRA TECHNOLOGIES $18.25 (Toronto symbol AAH; SI Rating: Speculative) (905-760-4200; www.aastra.com; Shares outstanding: 14.0 million; Market cap: $255.5 million; Dividend yield: 4.3%) develops and markets products and systems for accessing communication networks, including the Internet. Its technology is centered around business telephone systems, and includes products that integrate traditional and mobile phones.

In the three months ended September 30, 2010, Aastra’s sales fell 18.6%, to $161.8 million from $198.7 million a year earlier. Without the effect of the higher Canadian dollar, sales would have dropped 9.2%. The lower sales pushed down earnings sharply, to $371,000, or $0.03 a share, from $9.6 million, or $0.71 a share, a year earlier. Despite the drop, this was the company’s 50th consecutive quarterly profit.

The company gets 77% of its sales from Europe. The weaker European economy has hurt demand for the company’s products, and forced it to cut its prices. As well, the year-earlier quarter was unusually strong.

Aastra holds cash of $116.9 million, or $8.41 a share, and has no long-term debt. The shares yield a high 4.3%.

The company will need a sustained European economic recovery before it reports rising sales and earnings. Still, the stock trades at just 10.1 times the $1.80 a share that Aastra is forecast to earn next year.

Aastra is a buy for aggressive investors.

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