Why Nam Tai Electronics, Inc. Shares Plunged
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Nam Tai Electronics fell more than 11% Monday after the electronics and LCD-maker released quarterly results and affirmed that it will discontinue the majority of its struggling LCD module operations in favor of developing its real estate assets.
So what: Fourth-quarter sales fell 24.7% year over year to $234.9 million, which translated to a 75% plunge in diluted earnings per share to $0.20. The vast majority of this revenue was attributed to the production of high-res LCMs for smartphones at the company's Shenzhen facility.
Going forward, with the exception of around $50 million in LCM orders for automobile applications during the first half of 2014, Nam Tai states that there are no additional sales in its pipeline.
Now what: Once Nam Tai fully shutters its core LCM production business, management insists that it plans to "thoroughly focus our efforts on developing two parcels of property in Gushu, Shenzhen, and Guangming, Shenzhen [...] into high-end commercial complexes." At that point, Nam Tai will act as "landlord and manager" of the complexes. In theory, with the help of its $270 million cash hoard, Nam Tai will have transformed its business from electronics manufacturing to property development and management.
However, while Nam Tai's entire market capitalization is currently just $260 million, keep in mind it'll undoubtedly burn much of that cash during its transformation.
In the end, I think the move rightfully serves as a huge red flag for investors, who are leery after watching the business so radically shift its focus. Until Nam Tai can prove it has what it takes to be a successful property manager, I'll stick to investing in established real estate investment trusts with a solid track record of delivering returns.
Consider the 9 solid dividend stocks in this free report
Alternatively, there are plenty of other dividend stocks in which you can put your money to work.
After all, one of the dirty secrets that few finance professionals will openly admit is that dividend stocks as a group handily outperform their non-dividend-paying brethren. But knowing this is only half the battle. The other half is identifying which dividend stocks in particular are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor's portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.
The article Why Nam Tai Electronics, Inc. Shares Plunged originally appeared on Fool.com.
Fool contributor Steve Symington and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
