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Friday February 19, 2010
NetLogic: Next generation Internet
By Mike Cintolo, editor Cabot Top Ten
Eventually, this correction will give way to a new uptrend. Meanwhile, we've found several interesting growth stories; our favorite is NetLogic Microsystems (NASDAQ: NETL). 
NetLogic is a mid-sized chip company that sports triple-digit sales growth, and a stock that gapped up on earnings last week. It bills itself as a leader in providing “high-performance intelligent semiconductor solutions for next-generation Internet networks.” Talk about a mouthful!
The stock is one of the strongest in the market today because of a blowout fourth quarter earnings report, and more importantly, promises of more to come, as NetLogic (thanks partly to a major recent acquisition) is just ramping up on some larger programs with customers. Of course, the chip business can be boom or bust, but we’re impressed that the company has increased earnings every year since 2004, and 2010 should bring a 35% to 40% improvement to the bottom line. We like it. NETL hit 45 back in the first half of 2006, and didn’t make meaningful progress above that level until recently. So the stock has a very long launching pad to work from, which makes last week’s earnings-induced rally more promising. The stock trades just 500,000 shares per day on average, so volatility can be extreme, but we like the prospects and the its more recent four-month rest period. Try to buy a little on weakness or as the stock tightens up. Learn more about this financial newsletter at Mike Cintolo's Cabot Top Ten. |
News Flash
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The major indexes and most leading stocks are in short- to intermediate-term downtrends. Thus, the game plan is the same: Stay defensive, hold some cash, and limit new buying to just a couple of small positions in resilient stocks. 
But all that really means is that its chips feed into some of the fastest networking and telecommunication infrastructure products being sold, with customers like Cisco, Juniper, Alcatel Lucent and Motorola.