The Stock for January -- Corning Incorporated

My stock for January is Corning Incorporated (symbol GLW). The fortunes of Corning are now considered tied completely to the sales of TV's and Computers, a connection whose strength I dispute. Clearly, Corning is the biggest manufacturer of glass for flat screen televisions. Indeed, in the bigger screen sizes Corning has total control of the market. So the fortunes of TV sales has a strong effect on Corning's revenues and sales. But Corning is much more than just the maker of glass for large screen TV's. Corning's product "Gorilla Glass" is a high strength glass product that is being used on all manner of cell phones and tablet computers. Gorilla Glass is scratch resistant and nearly unbreakable. It gives cell phone manufacturers the durable screen that they need for touch screen product. Indeed, the estimate is that Corning will sell about a billion dollars of Gorilla Glass in 2011, or about 13% of total sales for the company. At the moment, the product does not produce as high a gross profit as the flat glass for LCD tv's, but the potential is extremely large. If TV manufacturers begin to use Gorilla Glass for their products (which would allow for thinner designs with a sleeker look), sales of Gorilla Glass could go through the roof.

Another product that Corning has in its repetoire is its bendable fiber optic cable. Corning produces fiber optic cable that can be bent at a 90 degree angle with no signal degredation. This product has not yet taken off, but in any future large scale fiber optic installations, Corning will be in total control.

There are other products that Corning has as well. Nevertheless, the market continues just to look at the flat screen TV's as controlling. Even here, however, Corning has done much better than expected. TV sales may not have been that spectacular this Christmas in the USA, but Corning sells world wide.

At its current price of 19.32, Corning is selling at only ten time expected earnings for the next twelve months. For a company with a product with the potential of Gorilla Glass (which has gone from sales of nothing to a billion dollars a year in two years), such a valuation is ridiculously low.

Investment in Corning is not for those with a very short term horizon, however. GLW should do well over the long term. It could easily go up by 50% over the next 18 months. For those who purchase the stock now at $19.32, I recommend also writing the February 20 calls at 50 cents or greater. This will reduce the cost, although you may lose the stock if the price is over 20 on the Febuary expiration date. Of course, if that option is exercised, you will earn a return in excess of 40% annualized for the seven weeks that you hold the position.

Corning is a stock that the market is overlooking.

Disclosure: I own Corning and have been invested in the company for much of the last year. I have no interest in the February calls mentioned above, although I periodically have both puts and calls written on Corning stock.


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