When you are building a portfolio, it is important to diversify your holdings in order to protect your capital—the last thing you want is to put all your stocks in one basket. When you diversify, your risk decreases. Even if you are investing in the same industry, investing in different companies reduces your exposure to risk significantly.
With penny stocks, you want to do the same thing. Look for companies that operate in different regions and industries. Why? If one region witnesses an economic slowdown, the other regions might be performing well. The same goes for industries—some industries might excel in at times of economic growth, while others might suffer.
STMicroelectronics N.V. (NYSE/STM) is a perfect example of one of those companies—well-diversified in different regions around the world, and in multiple industries. This penny stock is based in Switzerland, and has almost 100 subsidiaries operating in India, China, Brazil, the U.S., and China.
STMicroelectronics falls under the semiconductor industry, but serves a number of different industries. The penny stock’s products include microcontrollers, smart card products, standard commodity components, micro-electro-mechanical systems and advanced analog products, and application-specific standard products for analog, digital, and mixed-signal applications. STMicroelectronics also offers subsystems and modules for the telecommunications, automotive, and industrial markets.
This penny stock has market cap of over $5.0 billion, and currently trades at $6.46.
Looking into its financial statements, one can see STMicroelectronics holds more than $2.0 billion in cash. The book value currently stands at $7.82 per share. At the end of year 2011, the penny stock reported net income of $650 million, with revenue of $9.7 billion—compared to 2009, the revenue increased more than 14%, and net income rose significantly from a loss of $1.1 billion.
Another interesting thing to note is that STMicroelectronics currently has a dividend yield of 6.19%. The majority of the companies in the technology sector do not provide dividends.
In last quarter, the penny stock reported a loss of $0.08 per share, but revenue was up 6.5%, and its gross margin rose significantly higher. STMicroelectronics reported a second-quarter loss because it is currently involved in a joint venture deal, and it is trying to make strategic changes.
From a technical perspective, STMicroelectronics has a 10-day average volume of 1.9 million shares. Since June, the stock prices have been generally trending higher. From mid-March to mid-May, the penny stock experienced a drop of more than 50%, which was mainly because of quarterly losses; now STM is looking to recover.
The stock prices have been gaining momentum since June, and the bullish sentiment is pouring in. Both, the 200-day and 50-day moving averages are trading below the stock price, suggesting the stock price may continue to move to the upside.
What should an investor watch out for? STMicroelectronics will be releasing its third-quarter earnings on October 23.
Article Source: http://www.pennystockdetectives.com
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