Logitech (LOGI) and Market Recovery

The market is recovering and one of my beaten down holdings (Logitech-LOGI) rose 15% today after it reported a strong quarter and raised expectations. I still see a potential with LOGI as it is a leader in an industry that currently lacks serious competition, has a strong cash flow, started to re-purchase shares in the past quarter, new leadership, has no debt, offers innovative products and as the consumer sentiment here and in emerging economies continues to improve, it will benefit.

It seems like there will be no default of Greece which lifted the markets. Also, it seems like the EU is creating crises and resolving them only to feel good about itself. While the financial system may be stabilized I am worried for several reasons. First, unemployment continues to be high, second the price of oil is rising in unison with the market which suggests that commodity inflation is real, third Avon (AVP) reported disappointing results today and when we stop spending on improving our look it tells me that something is really wrong.

No one can help unemployment as there is world-wide oversupply of labor. Stories about Chinese workers making toys 12 hours a day, 7 days a week for $200 a month are not unheard of. Actually, the unemployment rate in the U.S. is better than average. However, the gas problem can be solved by investing in fuel efficient technologies. Government sponsored technology does not work as we have seen with the recent case of Solyndra. Most technological breakthroughs come from the army when it is a life and dead situation or from innovative companies that rely on market forces.

One of these companies is Tesla Motors (TSLA) named after Nikola Tesla, the inventor of the radio who stemmed from the Balkan Peninsula. While I am sure Tesla is selling well in the Balkan peninsula, I like the company because it has valuable patents and sooner or later it will either have to be acquired by Ford, GM, Honda, Mercedes-Benz, GE or even Apple or gain more market share for its $100k cars.

Currently, TSLA is unprofitable and has a market value of $3 billion which is 15 times less than Ford. If oil goes up to $200 from the $100 today, it is obvious the value gap between Ford and Tesla will narrow much faster than the rise in oil prices. In other words, Tesla is a great hedge for a rising oil price with an upside potential.


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