Buy Universal Electronics (UEIC)
Universal Electronics (UEIC) is being added to the Buy Low Opportunities Portfolio at Strong Buy. We have an opportunity to buy a stock that fell a ridiculous amount based on minor news at a low price today.
If you follow the stock market somewhat closely, especially if you’ve been doing so for decades, you recognize that we’ve been in a weird, emotional, trigger-happy market since August. We might as well take advantage of it when we can while we wait for the country to get past its current political obsessions and woes.
Universal Electronics (UEIC) was part of the Cabot Undervalued Stocks Advisor Growth Portfolio from March 1 through June 15 of this year. The stock rose 29%, and we sold it because it had become overvalued and was pushing up against price resistance. (As Murphy’s Law would attest, the stock began rising again a week later.) Since then, the P/E is lower, the 2017 EPS growth rate is higher and the share price just got cheap again.
The stock is down 17% this morning. What was the company’s incredible sin? Well it wasn’t the profit in yesterday’s earnings report because the quarterly profit came in above estimates. It was the fourth-quarter outlook, which will be lighter-than-expected because some new product shipments will be delayed. Read about the product delays in this press release. Go to the first paragraph under the heading “Financial Outlook.”
I never care much about temporary corporate problems. You can’t run a big company—or even a small one or a household—without putting out fires and nursing problems back to good health. Universal Electronics offers investors attractive earnings growth, the stock is somewhat undervalued, does not pay a dividend, and has a very low debt ratio.
UEIC has strong price support at 57.50. It will take a while to stabilize and recover, as will the broader stock market. Try to buy under 60. Your six-month best-case scenario—other than a corporate buyout—is that the stock will rebound to its recent highs around 77. Strong Buy.