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The new year 2010 will likely be a year characterized by a recovery in the personal computer market, and that's a major reason I'm reiterating my buy rating for Logitech International (LOGI), first recommended on April 13, 2009 at a price of $11.40. If you bought LOGI in April 2009, you're up a cool 52%. Look for a very health 20-25% revenue increase for LOGI in 2010, on the continued recovery in PC sales. Logitech is a world leader in leveraging its ergonomic and tech-advance research across multiple platforms: keyboards, mice, game consoles, headsets, speakers, and remote controls, among others. Hence, almost any positive datapoint for desktop computers causes Logitech's shares to move north.
What's more, trendsetter Logitech has other competitive advantages, including: multiple price points, rigorous cost containment, and outstanding supply chain management. Cost containment was aided by 10% staff reduction in 2009. The First Call FY2010/FY2011 EPS estimates for LOGI are 31 cents to 90 cents.
Further, at this juncture, the net-impact on peripherals of the trend toward portable computers is not known -- with a major variable being to what extent will portable computers displace the conventional, desktop pc.
Technically, Logitech's stock chart is strong -- an uptrend, and a recent pull-back from about $19.70 represents a buy opportunity. There will be psychological and 52-week resistance $20, but this will prove to be a pit-stop. According to my analysis, LOGI is head much higher.
2010 Outlook: Logitech is a long-term play, but if you're looking to sell LOGI within the year, take your profits after it rises to $23-24, if it fails to rise above $25.
Stock Analysis: Logitech International is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in LOGI 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 LOGI position before March 2010. Sell/stop loss if you were to buy shares in this company: $6.
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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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