Friday, September 15, 2006

Friday Stock Update: Network Appliance, Tata Motors and Bank of America

Network Appliance (NTAP) is priced at approximately 50 times earnings per share. This maker of storage solutions for large corporations (NTAP equipment is expensive) has 372 million shares out there in the market. It has a sharp management team, led by Mr. Mendoza since 2000. I know Mr. Mendoza is a Fighting Irish Notre Dame grad along with study at Stanford but that does not explain the stock price. Competitor EMC works out of the Boston technology corridor, has over 2 billion shares on the market and trades at 11 bucks a share. EMC has a P/E of 23. Perhaps the financial community sees the younger management team at EMC as a liability. EMC and NetApp both have a profit margin of about 11%, with EMC making that on $10 billion in sales and NetApp around $2 billion in sales. NetApp is a favorite of CIOs and network administrators at companies that can afford their products. The rest of the corporate world figures that saving money on EMC equipment is an acceptable risk.

Tata Motors (TTM) has been selling cars in United Kingdom nations including Australia and England for a few years now. Tata's Safari 4WD model is a real bargain except in India where buyers for a vehicle that expensive often select something more flashy. Of course Tata has other models besides the Safari, that is where the bulk of profits originate. Tata has long manufacturered a heavy truck that can withstand India's road network. Brand recognition in India, a huge Tata corporate family behind it and growing shares of the Far East market (China, Korea) make Tata stock an easy pick for the long term investor.

Bank of America (BAC) continues to offer outstanding dividends for a major global banking operation. In fact they recently increased their quarterly dividend to 56 cents for a $50 share. Find another stock that pays you that much each quarter on 10,000 shares without selling cigarettes to little children (MO). True, BoA sold out of part of China but they still have massive holdings in other nations and rely on far more than the U.S. mortgage or housing market for profits.

The SENSEX indicator of the Bombay Stock Exchange, BOVESPA in Brazil, and BOLSA in Mexico are pointing to excellent years in those growing nations. They will continue to benefit from deals made with China and nations besides the U.S. through 2007. Find funds that invest there with low expense ratios and you can honestly claim to have a diversified international portfolio!

Note: The author owns what he recommends and is not employed by any institutional investor or NASD-registered entity.

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