Stock Purchase: Corning – Glass Half Full?

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On Aug. 16th, I added 500 shares of Corning Glass (GLW) to my portfolio. Here's my logic.

Note: This post concerns the purchase of a stock in my personal portfolio. I believe those in the business of offering financial advice to others should be accountable, so whenever I buy or sell a stock, I disclose it. Learn more about my investment background and experience on our about page.

One of the stocks I bought last year, ADC Telecommunications, was recently taken over at $12.75. Since I had 1,000 shares, that means I’ll soon receive $12,750 – and with the market in the summer doldrums, I thought now might be a good time to reinvest that money.

When you look at my portfolio, you’ll notice I haven’t bought a stock for a long time. In fact, the only purchases I’ve made the entire year are for shares of beaten-down bank stocks. But yesterday I bought 500 shares of Corning Glassworks (GLW) at $16.67/share, for a total, including commission, of $8,337.00. Here’s why I chose it.

Corning: no more casserole dishes

Since 1851, Corning has been making glass. They’re famous for Corningware: the glass baking dishes most of us have in our cabinets. But today, Corning primarily makes fiber optics for the telecom industry and glass components for computers and televisions. About half their sales are from TV and computer glass, about 25 percent come from fiber optic cable, and the rest is derived from environmental technologies, life sciences, and specialty materials.

Here’s the upside

Once you understand what Corning does, you can probably figure out the upside: The LCD television market is huge, expanding, and Corning is a key supplier of the glass on the front of these TVs. Corning believes sales of LCD TVs will be up 28 percent this year. While fiber optic cable sales are growing slightly, the weak economy has kept growth for that material in the low single digits – but since fiber optic cable is the backbone of global communications, as the economy rebounds, so will sales.

There’s been a recent buzz about Corning’s Gorilla Glass: It’s a light, thin, but super strong, glass that Corning is touting for handhelds, computers, and the next generation of borderless TVs (check out this article). Corning expects to sell about $250 million of it this year, but that could quickly grow to $1 billion or more next year.

In short, new technology requires glass, and no company in the world is better positioned to exploit that need than Corning. In addition, the stock is trading at less than 10 times this year’s expected earnings, has a ton of cash, and a manageable debt level.

My goal for Corning is around $25/share within the next two years. If I’m right, that’s a 50-percent gain.

Here’s the downside

The downside is simple: the economy. With many believing we’re heading for a global double-dip recession, if not an outright depression, anything that would keep consumers from spending on new technology will hurt Corning. I believe the economy is recovering (check out this article) but if I’m wrong, I’ll only be wrong on the timing, not the stock. Sooner or later the economy will recover and when it does, Corning will shine.

But if the economy does tank, Corning could go a lot lower: It traded below 10 when times were tough back in 2008.

Should you jump in?

When it comes to offering money-related advice, I believe in putting my money where my mouth is. So far my real-money portfolio is doing well – keep an eye on it and see how it progresses. But don’t blindly buy the stocks you see in these posts or within my portfolio. These stocks are suitable for me, but they may not be in any way suitable for you. Do your own research and make your own informed decisions! These aren’t recommendations. They’re simply a way for me to remain accountable to people – like you – to whom I offer money advice.

Stacy Johnson

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