Blog > Investment Strategies > Alliance Fiber Optic: A bargain-basement deal
Share this article:
  • Print
  • Digg
  • del.icio.us
  • Facebook
  • Google Bookmarks
  • NewsVine
  • StumbleUpon
  • Twitter

Alliance Fiber Optic: A bargain-basement deal

Today's Financial News - Posted April 24, 2009

Washington’s free money has everybody looking to rake in a buck or two. While most investors are searching the obvious, the real money will be quietly made in the “underground” industry of fiber optics. Alliance Fiber Optic (NASDAQ:AFOP) is poised to be a winner.

By Andrew Snyder, TodaysFinancialNews.com

Baltimore – (TFN): Many investors are focusing on figuring out a way to get their fair share of the trillion-dollar stimulus. The ideas range from investing in concrete to commodities to stem cells to anything green. They all have potential.

But one of the most overlooked sectors may be the best, the fiber optic industry.

Washington is delivering more than $7 billion to the states in hopes of boosting the nation’s broadband availability (it makes it easier for Obama to email his campaign messages). In a capital-intense industry like fiber optics, it could easily be the catalyst for a long-term surge in valuations.

If you believe Obama’s spending will help drive the nation’s large cable and Internet providers to start burying more cable and extend their networks well beyond current boundaries like I do, you need to make your move now.

One company worth looking at is a tiny firm out of Sunnyvale, California. Alliance Fiber Optic Products (NASDAQ:AFOP) has been on my watchlist since late 2005, when its share price jumped from below $1 to well over $2.50 per share. As I write, you can get into the stock for just $0.88 per share.

A bargain-basement deal

The reason I have watched this company is not only for its product pipeline, although it offers everything from long-haul equipment to last-mile connectors, but also for its sensitivity to hype.

Yesterday, I wrote about noise investing. Basically, it is the principal of investing on variables outside of fundamental factors. Companies in politically hot industries like this one are especially vulnerable to short-term spikes based on hype and speculation.

With a market cap of under $50 million, Alliance is certainly vulnerable to liquidity crunches that could send its shares soaring. Fortunately, it has the fundamentals to back up the speculation.

A quick glance through the balance sheet shows current assets of over $34 million at the end of last quarter, with just $7 million in liabilities due in the next twelve months. Better yet, there will likely be enough cash flow to keep the company from tapping into its cash stockpile.

I am far from convinced all of the speculative sectors getting attention due to Obama’s stimulus will ever pay off the way so many investors want, but I am certain the fiber optic industry is going to get a desperately needed burst of capital.

With competition red hot and few major providers willing to risk huge piles of money expanding into a territory that could ultimately be a failure, the industry was relatively stagnant. But now that they are playing with “free” money, the situation will be entirely different.

Take a look at the industry, do some due diligence and profit as Obama signs check after check to America’s savvy investors.


Next Article: Swine flu: Investing in a sick pig

Related Articles

Posted by Andrew Snyder · Filed Under Investment Strategies, US Stocks and Markets 

Share this article:
  • Print
  • Digg
  • del.icio.us
  • Facebook
  • Google Bookmarks
  • NewsVine
  • StumbleUpon
  • Twitter

 Add to Technorati Favorites | Follow Us on Twitter!

Be the first to leave a reply.

Your comments are welcome