Seagate Technology (STX)

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Hey dudes! Follower #14 here and excited about Seagate's future. Not in yet but looking to be soon!


Jan. 6, 2012, 12:01 a.m. EST

How to profit from Seagate’s good fortune

By Nigam Arora
Thailand is the center of disk drive manufacturing. Recent flooding in Thailand damaged a large number of manufacturing facilities resulting in a lack of adequate supply of disk drives.

Seagate /quotes/zigman/118457/quotes/nls/stx STX -0.28% is one of the largest manufacturers of disk drives in the world. Compared to the competitors, Thailand flooding left Seagate relatively unscathed. This gave Seagate an edge because it could steal market share from competitors.

Seagate has pre-announced better than expected earnings and projections. Seagate reports preliminary Q2 revenue of $3.1-$3.2 billion compared to consensus of $2.81 billion. For Q3, Seagate projects revenue of $4.2-$4.5 billion compared to consensus of $3.62 billion. Seagate CEO, Steve Luczo, credited strong performance to Seagate's ability to take advantage of disruption caused by Thailand flooding.

As of this writing, Seagate stock is the fourth most active on Nasdaq /quotes/zigman/123127 COMP +0.81% and up about 8%.

Following are the four derivative plays to profit from Seagate's good fortune.

Marvell Technology /quotes/zigman/82457/quotes/nls/mrvl MRVL +0.85%

Marvell is a leader in providing disk controllers to the industry. Marvell's disk drive controller business had fallen off the cliff. Seagate's numbers indicate that the business for Marvel is recovering. Marvell also produces semiconductors for the mobile space. The stock has moved up on the Seagate news, but is a buy on any major pull back.

LSI Corporation /quotes/zigman/232578/quotes/nls/lsi LSI +7.72%

LSI is a competitor of Marvel. The stock has also moved up strongly on Seagate's numbers. The stock is a solid buy on any pull back.

Intevac /quotes/zigman/54874/quotes/nls/ivac IVAC +4.62%

Intevac provides manufacturing equipment to the disk drive industry. Since a number of factories in Thailand have been damaged, it is likely that Intevac is seeing increasing demand. Investors may position themselves before the next earnings released scheduled for February 1, 2012 after the market close.

Western Digital /quotes/zigman/245972/quotes/nls/wdc WDC -0.03%

Western Digital is the big competitor of Seagate. There are reports that factories of Western Digital in Thailand have been severely damaged. The great numbers at Seagate appear to be at the expense of Western Digital. This is one of the best trading stocks providing a steady stream of trading opportunities both on the long side and the short side.

The obvious question is, "why not buy Seagate stock?" I had anticipated the good news for Seagate and positioned my hedge fund on the long side. The buy signal was also given on ZYX Buy Change Alert . Now I am in the mode of taking profits. A signal to take profits has also been given to the subscribers of ZYX Buy Change Alert. Our proprietary Smart Money Indicator is showing that sophisticated investors are taking profits on the run up.