Today’s pick is a timely opportunity to pick up a tech stock at a (hopefully
temporary) discount from David C. Jennett’s Investment Letter.
“Aruba Networks, Inc. (ARUN, Nasdaq) produces software that allows wired
computers to talk to wireless computers, something of great importance to the
world these days. Recently, the company announced disappointing quarterly results,
blaming soft economies around the world as well as increased competition from
Cisco Systems (its biggest competitor). That was all investors needed to hear. If
Cisco was going to poach their customers, they didn’t want to own the stock. The
stock has dropped 50% in just two months.
“It appears to me that this is a case of throwing the baby out with the bathwater.
Even with Cisco’s recent successes, Aruba Networks still figures to grow sales 10%-
15% a year over the next few years. It will not take too big an effort to turn that
kind of sales growth into increased profits. At $13 a share Aruba is now priced for
a worst-case scenario, something I don’t think is fair. I am going to add the stock to
our portfolio this month and see if we can’t make a nice profit once investors come
to realize that they have overreacted to this (hopefully) short-term setback for the
company.”
David C. Jennett, The Investment Letter, P.O. Box 6170, Holliston, MA 01746,
800-542-5018, 5/28/13