Stock Values

The time has come to start nibbling on some savory stocks trading at ridiculously low prices and valuations. One well run company that has been on my radar for quite some time and is definitely trading as if there was no tomorrow is Corning Incorporated. Corning has been trading at quite a discount to it's true value for quite some time, but given the current market conditions, I demanded an extra margin of safety. That came yesterday, as Corning came within about 5% of it's 5 year low.

Of course, there are good reasons why this great company is trading at a prior 12 month P/E of less than 3 days after reporting impressive third quarter results. But, just as certainly, these reasons are overblown.

Some background, first... Corning is an amazingly agile 157 year old company that most of us still remember as brand name housewares low tech company that during the last recession seemed destined to go out of business. Today's Corning is that no more, but a completely transformed high tech powerhouse, a leading maker of glass substrates used by the electronics industry and fiber optic equipment used by the telecommunications industry, with an important environmental technologies business, a profitable life sciences business, as well as additional small, but promising businesses.

So, why the scare? Well, most recently more than 50% of Corning's profits have come from the highly profitable display technologies business - that's the glass substrates that Corning sells to mostly Korean manufacturers of LCD panels that go into TVs, monitors and notebook computers. And this happens to be Corning's the most at risk business, as the world gazes into the abyss of potentially the worst worldwide recession in modern times.

However, on the bright side, we have the mitigating factors.

Demand for LCDs in unlikely to suffer significant setbacks for several reasons: 1. The switch to digital TV in the US is coming in February of 2009 and there are plenty of people who are yet to upgrade their sets to LCD TVs. There are also those who will try converter boxes first, get disappointed and upgrade to the real thing. 2. LCD displays use far less electricity than do other technologies and especially the CRTs. As electricity becomes more expensive, upgrades to LCDs become no-brainers in a variety of heavy use environments. 3. No matter what the economy, people still need to take their minds of things, be entertained and feel like kings. This is why movie theaters did so well in the US during the Great Depression. As costs of LCD TVs have come down drastically over the past several years, large panel LCDs are starting to fill this affordable luxury niche. Consider that the latest and greatest 42" LCD TV can now be had for around $800 on sale, which is less than the cost of taking an average family out to the movies twice a month for a year. 4. Corning is the largest and lowest cost manufacturer of the glass substrates that get assembled into LCD displays.

The good news don't stop there, either. Corning's second largest business - fiber optic - is doing well and is unlikely to suffer in the current economic climate. Their environmental business has a very important and exclusive pollution reduction technology used in automotive industry. The company is also in good financial shape with more than $2 / share in cash equivalents and low and declining debt. Corning is one company that is well positioned to not only weather the storm, but come out stronger, as weaker competitors fall by the wayside.