Finding the best tech stock to own today

By: Money_and_Markets

Twenty-two days — that's how long I spent racing around Asia on this last trip. I missed one of my daughter's dance recitals and a lot of my boys' baseball games. But I firmly believe there's no substitute for boots-on-the-ground research.

Reason: Every trip I've ever made has translated into big investment profits down the road.

And let me tell you, this was my most productive trip yet! I looked at several dozen companies, and I have a small handful to add to my buy list.

One company, however, stood out from all the rest. In my opinion, it's the #1 best tech stock in the world to own today. My investigation started with a bus ride …

"Jhongli? Most Americans Visit Our Shijr Plant!"

My host was just trying to be helpful. He knew that the location I wanted to visit was a long bus ride to the gritty industrial city of Jhongli. It wasn't exactly a popular tourist destination. The other factory was just outside of Taipei and much more convenient.

But I wanted to visit the Jhongli factory for two reasons:

#1. 87% of this company's sales were from the Jhongli division.

#2. I've learned that the further away you get from the Investor Relations department, the more useful the information you'll get.

So … I was off on another adventure on another crowded bus to another Asian backwater town equivalent. Hey, riding a bus in a foreign country is an adventure by itself. It wasn't that long ago that I accidentally ended up on my way to Tibet because of incorrect pronunciation!

Jhongli is an ordinary, busy industrial city about two hours outside of Taipei. It is considered the capital city of the native Hakka people who live there in great numbers. In recent years, the area has also seen a large influx of foreign workers — mainly from the Philippines and Thailand. They've settled there because of the abundance of factory jobs.

Two of my escorts were T.C. Chung, the plant manager, and Frank Wu, the production manager. These two men are on the front lines so they don't suffer from the same perpetual optimism as the corporate mouthpieces.

I don't mean to imply that investor relations people are dishonest. It's just that their job entails painting their company in the most positive light possible. In contrast, Mr. Chung and Mr. Wu are just simple, hard-working employees who answer questions with honest and often revealing answers. I like that.

The factory itself was much like many of the other high-tech factories I've visited. The first floor was for administration, and the middle two floors for production. After touring the first three floors, my guides started to escort me down the stairs.

"What's on the fourth floor?" I asked. The answer made my eyes bug out …

"Our New Production Equipment Will Arrive In June, and It Will Fill Up the Fourth Floor."

That meant that the company was going to increase its production by 50%. In my book, more business usually translates into more profits.

Just to make sure, I asked how many shifts a day would the fourth floor be running.

The reply: "Twenty-four hours a day for six days a week, Mr. Sagami. Our current staff has been working seven days a week too many times."

The company's numbers back up those claims. Sales of this factory's division more than doubled in 2006. And according to my host, they should do the same again this year!

In fact, this company is already looking to acquire more production space because they expect to reach maximum production capacity by 2008.

"Business is VERY good, Mr. Sagami."

Yes, business is very good. What's more, it could take off like a rocket to the moon if it gets a piece of an upcoming Federal Aviation Administration contract to replace our nation's outdated radar-based flight tracking system.

When I asked about it, my host smiled from ear to ear and said, "I cannot talk about it, but we are very — how do you say — happy!"

His coy answer told me volumes about the company's chances. If all goes well, I think this stock could double in very short order.

Don't let me give you the wrong idea, though. The reason to own this stock is not because of what it may or may not get out of the FAA. You want to own this stock because it's the dominant leader in a business that is growing at a breakneck pace.

But wait … there are even more reasons to like this company:

Eating their own cooking: The company's two founders are also its two largest shareholders. Overall, insiders own a whopping 41% of the stock. That alignment with shareholders carries over to executive compensation, too. The CEO paid himself just a $250,000 salary and a $203 bonus last year. That's not a misprint … $203!

Fast, but getting faster: Since its 2000 IPO, this company has increased sales at an annualized 30.6% clip. And business is accelerating. First-quarter sales soared 53% while profits jumped 60%.

The best tech bargain on the planet: This company is selling for only 20 times earnings, which means you are getting a mountain of growth for peanuts. I consider it the very best tech stock bargain I've found anywhere.

If that's not enough to knock your socks off, get this: The company earns returns of around 50% on its invested capital, one of the most productive numbers you'll ever see!

Pristine balance sheet: I know I'm old fashioned, but I'm a stickler for clean balance sheets. This company has ZERO debt, $360 million in cash, and it recently doubled its dividend. It also regularly engages in share repurchases.

I got back to my hotel room and sent my Asia Stock Alert subscribers an urgent Flash Alert. The stock was in the mid-$50s then, and now it's already jumped to the low $60s.

That's nothing though — my first target is $100 by the end of 2008, and no baloney, I expect it to quadruple in value by 2010!

So was that bus ride to Jhongli worth it? You bet!

Best wishes,

By Tony Sagami

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