I am starting with some common and calls…
Let me cut to the chase. I’ve got a brand new long stock pick for the portfolio. This name’s gotten crushed on no fundamental changes to its business during this big downturn, and we’ve now got the opportunity to buy the stock near 52-week lows and at very reasonable valuations.
The company’s called Autodesk Inc., and it’s what I like to call an old-school new techie. That is, this is a proven software company with an industrial base of customers that is positioned to benefit hugely from the smartphone/tablet/cloud revolutions that will make it ever easier for customers to acquire, use and build on top of Autodesk’s platforms.
I am starting with some common and some slightly in-the-money calls expiring in the next couple months (say some $28s and $29s for strikes). But just getting started and will be scaling into a full position over time, as usual.
Here’s the fundamental Revolution Investing analysis for this one:
Summary
Autodesk is a design software and service firm based in San Rafael, Calif.
Balance sheet
Cash and cash equivalents: $1.1 billion
Short-term investments: $258 million
Long-term investments: $176 million
Total cash: $1.53 billion
Total debt: 0
Net cash: $1.53 billion
Outstanding shares: 231 million
Net cash / share: 6.6
Share price: $29.45
Enterprise value / share: 23
Total market cap: $6.8 billion
Enterprise value: $5.25 billion
2012 sales growth: 12.4%
2012 earnings estimate: 1.68
Enterprise value multiple: 19 times forward earnings
Dividend and yield: N/A
Autodesk sits nicely at the intersection of two prevailing trends: the growth (or anticipated growth) of emerging industrial markets and the explosion in apps for business.
Best known for its CAD software, the de-facto standard for architects/engineers/high-school metal shops, Autodesk hasn’t been shy about releasing its products for new platforms when they make sense — as it did last year when it began writing software for Macs after abandoning Apple Inc. in ’94. And its been releasing apps for the iPad, for both the enterprise and retail markets, that have been getting rave reviews.
Boasting a pristine balance sheet ($1.5 billion in cash, no net debt) Autodesk is a safe place to be for the next decade. After bouncing off its recession lows, the stock hasn’t done much for the year to date. Look for Autodesk to roughly track the hopes/fears of global expansion/contraction.
While the broader markets have pulled back 10% or so from their recent highs, this stock’s gotten killed. This now looks like a good buying opportunity to me.
The company will be reporting earnings on Thursday this week and as you can see from the adjacent chart, there’s not a lot of optimism heading into the report. I don’t know that this report and the guidance therein will be blowout and wonderful. But I do think the stock looks like a good buy at these levels, and I think it’s more likely to break this downtrend if this report’s any good than it is likely to crash on a bad report.
