Aggressive Trade in Computer Accessories

By Travis Johnson, Stock Gumshoe, January 8, 2009

I don’t think I’ve ever written about Stephen Leeb, and it’s not because he spells his own name two different ways in his ads …

“Since we started Steven Leeb’s Aggressive Trader on July 9, 2004, our median return is 26% on all closed positions, with the median holding period being 26 days.

“We’re not after the rare out-of-the-park home run and we don’t promise you recommendations that are going to double or triple overnight. Stephen Leeb’s Aggressive Trader is about stringing together quick, realistic gains of 7%…10%…maybe even 18% or 25%.”

It’s mostly because, though he does run this rapid trading service, he doesn’t advertise very aggressively with teasers. He promotes himself just fine, thank you very much, but doesn’t send out a lot of “buy this top secret company” foofaraw that I enjoy so much.

Today, however, is different — I just got an ad from Stephen Leeb for his Aggressive Trader service, and it says that the collapse of Intel shares has unfairly dragged down another tech stock, a hardware company that makes accessories. Though he often uses options for this rapid trading service, in this case he’s telling folks to just buy the shares for a lower-risk trade … so I thought y’all might be interested.

Of course, he didn’t tell us the name of the stock — that’s where your subscription to Aggressive Trader comes in, or, if you’re as wise as I believe you to be, you just read on for a few paragraphs and find out the name from your friendly neighborhood Stock Gumshoe, and then you can research it yourself and see if it puts the cream in your coffee.

So what clues does he toss our way about the computer stock he thinks you should buy?

I thought you’d never ask — looks like we’ve got plenty to feed into the mighty Thinkolator:

“We want to use this opportunity to pick up shares of a unique computer accessory manufacturer. This stock has etched out a nice looking basing pattern in the last month and a half. Although we don’t look for the stock to return to its 52-week high of $40 anytime soon, it could very easily move from the low to upper teens in short order.

“At just 8 times June ’09 full-year earnings, 1 times sales and with nearly $5.50 a share in cash on the books the stock is quite cheap, limiting our downside risk. Nevertheless, we’re playing this somewhat cautiously by purchasing the stock outright.

“We rate this a medium-risk trade as we will be holding an equity position in a healthy company.”

So what have we here?

Well, this is one where what looks like the best fit is not a perfect fit for those clues, so take it with a grain of salt, but my best guess on this is …

Logitech (LOGI)

You’ve probably heard of Logitech, or at least used one of their mouses or keyboards or headsets or other peripherals — they’re the biggest stand-alone pure-play computer peripherals and accessories company, and they’ve been touted by other advisers in the past, too (I think they were a Motley Fool pick at one point, but don’t quote me on that). They’ve also been around for a while, and have driven innovation in some areas (particularly computer mice — they just sold their one billionth mouse a couple months ago). They consistently win prizes at events like the current Consumer Electronics Show, and they do seem to have good relationships with most of the computer makers.

Why is this a guess? Well, they are trading at about 1X sales and with a current PE of about 9, but their fiscal year ends in March, not in June. And they don’t have $5.50 a share in actual cash on the books, but their book value is almost exactly $5.50 a share, so perhaps there’s some wiggle room there. They also didn’t quite reach $40 in the last 52 weeks, but they did hit an intraday high of about $37 just over a year ago, so again, not sure how precise they are in their ads but this may be “close enough.”

Is Logitech right for you? Well, that’s something only you can decide, of course — the shares may well be “basing” off of their lows of the last couple months, but they certainly came down hard along with the rest of the market before that. Recent weeks have seen Logitech cutting workers, withdrawing their estimates for this year, and, as recently as yesterday, getting downgraded by at least one analyst. None of this is specific to Logitech, all the other manufacturers of electronics gear are also slashing or skipping forecasts and worrying about what customers will do in this environment. I’m very glad that I’m not responsible for planning inventory this year, I have no idea how someone could accurately guess the number of computer mice that will be purchased in 2009. Will hiring return at some point, or will unemployment hit 10% and IT budgets get slashed?

Logitech seems to be a nice, solid company, certainly not as wild as a lot of the small makers of accessories and peripherals (one that makes the newsletter and chat board rounds quite a bit, for example, is Mad Catz, a penny stock that makes gaming accessories). That said, it’s hard to imagine margins or sales being great this year.

The company releases earnings on January 20, so there may be a catalyst for something in the near future — bad or good, I don’t know, but certainly there isn’t a particularly huge level of optimism about these shares right now. There were rumors last year that Microsoft would take over Logitech, but they were consistently denied, and may have run into trouble with the Justice Department anyway (Microsoft and Logitech dominate the aftermarket for mice and keyboards). LOGI itself is perennially active in the merger and acquisition space, but that generally takes the form of them buying out small private companies to pick up new business lines or technologies.

Is this Stephen Leeb’s pick for a short term trade? Most of the time I can tell you these things with 100% certainly, but today I can’t quite be sure — it’s just the best guess I’ve got. If you think you’ve a better match for those clues … or a better idea for a short term trade … or just a thought or two about Logitech, by all means, chime in below.

Happy Investing!