Take Boring Over Flash

 | Mar 26, 2014 | 2:30 PM EDT
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The big splash out of Silicon Valley this week is Facebook's (FB) $2 billion bet on wearable hardware company Oculus VR, a company that has yet to ship or sell any products. This deal comes shortly after Facebook's $19 billion purchase of WhatsApp.

The valuations for these two acquisitions are staggering by nearly all measures. There's virtually no room for error in these deals for Facebook. If they turn out to be duds, the pain will be felt. On the other hand, Facebook founder and CEO Mark Zuckerberg clearly has the ability to see future potential of technology applications, and if these acquisitions work out, perhaps the price paid will make sense.

There's a lot of excitement in the technology sector right now. The move to a mobile platform is the second coming of the Internet wave, and all the big names are using their cash-rich balance sheets to make their own bets. That excitement comes at a very dear price. Since I unfortunately do not find myself at the epicenter of this excitement -- where all the real money is made -- I will instead relish boring over exciting in the stock market. (It is estimated that Spark Capital and Matrix Partners, two early investors in Oculus, will reap a twenty-fold return based on Facebook's buyout).

Instead, I'll take boring cash cows like Cisco (CSCO) stock, which I called out for being absurdly cheap on Monday. Not that a day's performance means anything, but Cisco was up nearly 4% by day's end.

I will take industrial goods manufacturer Raven Industries (RAVN), which has seen its share price drop to $32 from $42 over the past several months. Even at that price, shares still trade for 27x trailing earnings. Raven is a company that has been consistently profitable for years, even during the recession. Plus, an 18% unlevered return on equity, along with 10% net margins, is something to get truly excited about. I'm keeping an eye out for lower prices.

Boring natural gas resources owned by Chesapeake Energy (CHK) are exciting to me. Natural gas gives the U.S. a strong comparative advantage in the world market. The price of natural gas has had a nice move this year but that hasn't translated into a move for CHK shares. But the company, in my view, is becoming more valuable since the value of its natural gas reserves is increasing as natural gas prices move. Constructing terminals to export the resource will only increase global demand. It certainly doesn't hurt that Russia's recent activities will probably restrict the natural gas being bought from Russia, which should favor U.S. suppliers.

Boring, exciting, big or small -- in the end we all invest in stocks to make money. Excitement breeds optimism, and optimistic prices usually cause more investors grief than gains.

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