Last week we spoke about data storage giant EMC Corp. (NYSE:EMC) being way undervalued, based on its core business plus its holding in VMWare (NYSE:VMW). Today, I'd like to focus on another stock that appears to be trading at a big discount to actual value.

Cypress Semiconductor (NYSE:CY), a chip company, trades with a market cap of about $6.3 billion, and has shown decent revenue growth. It holds a 53% share in Sunpower Corp. (NASDAQ:SPWR), which makes solar panels and cells. Sunpower has been flying ever since its IPO, and currently trades at a market cap of $13.2 billion. This makes Cypress's share in Sunpower around $6.9 billion. I am aware that in situations like this the parent company will rarely trade based on the full value of its holdings, but this is a bit silly. It's not like Cypress's core business stinks.

"Assuming we do not encounter any major macroeconomic disruptions, we are well-positioned to sustain substantial revenue gains into 2008," Cypress CEO T. J. Rodgers said. This doesn't sound like a business that is being valued at negative $600 million (approx.).

Yesterday, Credit Suisse analyst John Pitzer noted that Cypress alone is worth somewhere around $2 billion. In a perfect world that should give Cypress a market cap near $9 billion. Again, I understand that we don't live in a perfect world, but at a 40% discount, Cypress looks like a nice, cheap play.

Disclosure: Writer holds stock in EMC. Writer has clients who own CY, but does not own it personally. He holds no position in any other stock mentioned as of 11/8/07.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com.