Everyone seems to be talking about "disruptors," technologies (or companies promoting technologies) that disrupt the established order.
A recent example was Microsoft's (MSFT) $7.5 billion write-down on the $9.5 billion purchase it made a little over a year ago of Nokia's (NOK) phone unit. The folly of this purchase was even worse than it at first appears because the purchase price included $1.5 billion in cash. The culprit in this debacle was the disruptive technology of smartphones made enormously popular by the likes of Apple (APPL) and others. (Apple is part of TheStreet's Action Alerts PLUS portfolio.)
New technologies seem destined to ruin many established companies; e.g., BlackBerry (BBRY) or Kodak (KODK) or Borders bookstores. But it turns out that some companies can adapt and not be disrupted.
Kodak's rival Fujifilm Holdings (FUJIY) is an example. Today, with a market cap of about $19 billion, the company is involved with such businesses as medical equipment, pharmaceuticals, cosmetics, nutritional supplements, printing materials and equipment, optical devices (camera modules for smartphones, for example) and digital imaging.
For me to get excited about a company, it must earn high grades from at least one of my guru strategies, which are computerized strategies I modeled after the writings of great Wall Street investors. One of my stalwart strategies, based on Peter Lynch's thinking, favors Fujifilm. In particular, it likes the stock price as expressed via the P/E/G ratio, which is price-to-earnings relative to growth. This measures how much the investor is paying for growth. With a P/E/G of 0.67 (1.0 is the max allowed), Fujifilm has a well-priced stock. Also in its favor is a relatively modest debt load (debt is about 15.7% of equity).
Another blast from the past is Pitney Bowes (PBI). Once ubiquitous in offices around the country with its postage meters, the company is still prospering by having technologies that address e-commerce, shipping and mailing, customer information management, customer engagement and more.
A guru strategy I based on the writings of Joel Greenblatt likes this company, which refuses to be disrupted. The strategy ranks companies from among all publicly traded stocks on the NYSE and Nasdaq based on earnings yield and return on total capital, before calculating a final ranking. Among the thousands of stocks in our database of publicly traded companies, the Greenblatt strategy ranks Pitney Bowes No. 13. Snail mail may be a nearly forgotten form of communication, but Pitney Bowes, which so long relied on it, has decidedly moved on and is successfully addressing new markets.
The name of the next company I want to tell you about is an indication of its origins: 1-800 Flowers (FLWS), now known by the somewhat schizophrenic name of 1-800-Flowers.com Inc. The ".com" in its name shows the company has moved from its original telephone-marketing platform, from which it sold flowers, to the Internet, and it has done so successfully. My Lynch-based strategy is impressed with the stock's P/E/G of 0.45. A P/E/G of 0.50 or less is considered very favorable, thus placing 1-800 Flowers in the group of very well-priced stocks.
Perhaps none of these legacy companies will reach their former heights before new technologies ravaged their original markets, but these are companies that are doing well and have favorably priced stocks. They have earned our respect.