One worrisome factor is the rate at which PC sales are shrinking. Micron Technology, Inc. (NASDAQ:MU) derives a good chunk of its revenue from PC DRAM sales, and a continuation of worse-than-expected PC sales could cause a supply glut that would crush pricing. With much of the memory sector commodity-based to begin with, this could push Micron Technology, Inc. (NASDAQ:MU) back into a contraction almost as quickly as it rebounded from one.
Comparatively speaking, for a cyclical company Micron Technology, Inc. (NASDAQ:MU) isn’t that cheap, either. Many commodity-based chip providers cautiously manage their balance sheet in anticipation of the next downturn. Micron, on the other hand, is carrying around a steep $1.07 billion in net debt as of the most recent quarter. This isn’t to say Micron Technology, Inc. (NASDAQ:MU) doesn’t have sufficient funding, as it did end the quarter with $2.55 billion in cash. However, its debt levels don’t inspire confidence that value investors can squeeze any more out of Micron at more than 13 times forward earnings.
Aside from being a menacingly long and type-challenging company name, IntercontinentalExchange Inc (NYSE:ICE), also known as ICE, could mark in intriguing buy candidate for investors if history continues to repeat itself.
Admittedly, one of the first humble lessons you’re taught while investing is that you won’t always be right. While history doesn’t always repeat itself, it seems to more often than not. Where this comes in particularly handy is in regards to the IntercontinentalExchange Inc (NYSE:ICE)’s futures market. Although volatility has been particularly low over the past two years, I don’t think this is sustainable. Over the long run, when volatility returns to its historical norm, options volume would be expected to increase in a big way which will lead to bigger bottom line profits for IntercontinentalExchange Inc (NYSE:ICE).
Another intriguing aspect of IntercontinentalExchange Inc (NYSE:ICE) is its pending merger with NYSE Euronext (NYSE:NYX). The merger with NYSE Euronext (NYSE:NYX) will broaden ICE’s revenue breakdown dramatically from its current setup to the point that only 10% of its revenue will come from cash-based equities trading. Listing fees, market data, technology and futures/options trading will make up more than equities-trading, giving ICE the ability to resist economic downturns like never before.
I suspect IntercontinentalExchange Inc (NYSE:ICE) has an outside chance at growing by 10% or more annually over the coming three years, which would make its forward P/E of 18 appear quite cheap.
The article 3 Stocks to Get on Your Watchlist originally appeared on Fool.com is written by Sean Williams.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of, and recommends, Intuitive Surgical. It also recommends MAKO Surgical and NYSE Euronext.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
