2 Electronics Companies to Buy and 1 to Sell
Phillip is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Investing in electronics companies is relatively risky due to fluctuations in demand. But because I see the economy staying strong over the next several years, I think demand for these firms' technology will be long-lived.
Underneath those devices you are carrying comes a lot of testing and small parts. These stocks are behind the scenes, but are able to benefit from major breakthroughs in gadgetry. However, before buying just any of these stocks, it is important to ensure they have what it takes to not only keep current operations alive and well, but also to develop their products so that they can thrive on innovation.
Corning still knows what it takes
Corning (NYSE: GLW) has major manufacturing capabilities that ensure the company is able to be the leader in supplies of glass substrates, which are used in liquid crystal displays, or LCDs. Its wide technology portfolio will also allow the firm to stay atop in the tech field. The displays make up the vast majority of Corning's net income, and are used in televisions, computer monitors, aircraft cockpit displays and instrument panels. Being a leader in these fields likely means a steady flow of revenue long into the future due to their popular nature.
The company also has a finger on the pulse of future technologies. In June, Corning invested $60 million in California glass maker View. That company is producing "dynamic glass," which can essentially reduce energy consumption by 20%, the firm stated. The glass can lighten and darken, to control the amount of heat and sunlight in buildings. With the global market for dynamic glass at about $100 billion a year, look for Corning to invest further in the technology, and watch as its revenues take off alongside the technology's growing appeal.
Eaton faces scandal
Eaton (NYSE: ETN) is not the stock to own right now, as its credibility has been shot due to allegations from the Shareholders Foundation over executive compensation. According to the Foundation, Eaton's Chairman, CEO and President received $13.5 million in pay in 2011, and that rose to $20.4 million in 2012. Likewise, the Vice Chairman and Chief Financial and Planning Officer's compensation rose from $5.07 million in 2007 to more than $6.41 million in 2012. That casts a dark shadow on this company, and should turn shareholders off, as long as these executives are working for the company.
Furthermore, the firm is tied to its economic cycle, despite potential downturns in the economy. That means the return on investment would potentially fall below the cost of capital during recessions. This stock is staying out of my portfolio.
Agilent is agile
Agilent Technologies (NYSE: A) is thoroughly diversified. The company is involved in electronics, life sciences, communications and chemical analysis. The firm recently announced its modeling technology is being used by the Shanghai Integrated Circuit Research and Development Center. Also, in July, the company announced its new E6607C EXT wireless communications test set, which tests multiple wireless devices simultaneously.
The company has several competitive advantages in the various markets in which it's involved, and its position can bring significant revenues. Because the company has dedicated a significant amount of time over the last few years streamlining its operations by optimizing manufacturing capabilities, its net profit could improve substantially in the years ahead. The firm also has a broad global reach, which allows it to potentially profit from developing world economies.
Technology is just getting started
The amount of progress society has made in the development of technology over the last two decades is staggering. But, like a snowball, each new layer leads to the collection of more layers, and before we know it, technology will control an even greater stake in the way we live our lives. Firms heavily invested in the sector are set to make major profits during this tremendous growth period.
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Phillip Woolgar has no position in any stocks mentioned. The Motley Fool recommends Corning. The Motley Fool owns shares of Corning. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!