Speak now, or forgo a chance to earn an out-sized gain during the current economic expansion with Seagate Technology (STX), which is why I'm reiterating my buy rating for the company's shares, first recommended on July 8, 2009, at a price of $9.50. If you bought STX in July 2009, you're up an impressive 97%.The buy rating in July 2009 for hard disc drive manufacturer Seagate was based largely on the company's demonstrated business model, and the calculation that traditional, desktop, bulky PCs will dominate the computer market, led by office purchases, for the next 3-5 years, despite the steady market share increase in mobile devices and platforms. The mobile cubicle may be on the rise, but the office cubicle isn't disappearing.
Well, since the July 2009 buy call, mobile technology has advanced much faster than expected and its reach is broadening. As a result, the conventional, box-based desktop PC may not have a 5-year window -- we will likely see more 'laptops on desktops' in the quarters ahead. Laptops/notebook computers are roughly equivalent to desktops that you can take home. Still, the view from here argues there's at least one more upgrade cycle for desktops -- to Seagate's benefit -- before society shifts to 'the computer anywhere/everywhere.' The First Call FY2010/FY2011 EPS estimates for STX are $2.27 to $2.43.
Institutional investors (IIs) have apparently been thinking the same thing, because technically, Seagate's stock chart has, for the most part, remained above the key, 50-day moving average since the July call -- a sign that IIs are adding/establishing positions in STX.
Finally, the Sell/stop loss has been raised to $9.40 from $4.25, or to just below the entry point; hence, this is an essentially zero-risk trade for your July-bought shares.
2010 Outlook: Seagate is a long-term play, but if you're looking to sell STX within the year, take your profits after it rises to $24.
Stock Analysis: Seagate Technology is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in STX now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your STX position before March 2010. Revised Sell/Stop Loss if you bought shares in this company: $9.40.
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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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