Seagate STX

Business: Manufacturer of hard disk drives. Competes with WDC, STEC and others in this commodity of a business.

Why I like it:
Seagate has dropped considerably over the past couple of months. It is percieved to be a cyclical in a dying industry. Looking at it compared to its growthy brothers (flash) we can see that it has produced consistent profits for owners of the business. FCF has averaged over 550M/year for the past nine years. This is even with including the 2.5B goodwill write off taken in 2009.

Unlike flash producers it is actually making money after CapEx. MU is a perfect case in point of a business that really isn't making money, it just looks like it is.

STX has a 0.72/share yearly dividend and is buying back shares by the bucket load.

Temp Issues:
High commodity prices are squeezing profits and the fear that this cyclical is headed the way of the dodo is starting to price in. On multiple years of conference calls we can see the angst in each analysts voice over weekly changes in shipments.

Valuation:
No position for now. If offered at say 8x normalized FCF (EV of 4B...MC of 3.5B) I would build a position.