One of my favorite investment ideas continues to be hard drive makers like Seagate (NYSE:STX) and Western Digital (NYSE:WDC). These companies have low valuations and fewer competitors than they did in the past -- plus, in my opinion, unappreciated growth prospects.

The low valuations are probably a result of flash memory encroaching on the low end and squeezing out hard drives in some small consumer devices. The most notable case was when Apple (NASDAQ:AAPL) chose NAND flash memory for the iPod nano, eliminating the earlier hard drive-based model. Nevertheless, the high end is safe from the flash onslaught, and it looks like the growth outlook for capacious hard drives is robust.

One of the biggest applications for giant hard drives is its use in digital video recorders or DVRs. DVRs are found in only about 7% of the 110 million households with a television. Does anyone else think that percentage is going to grow? Of course, many of the people who already own DVRs will need to replace them to record high-definition television. My guess is that over the next few years, most people who already own a DVR will go out and buy a new one. I also expect a lot of people to go out and buy great big external hard drives that will be used a lot like a basement, but to store old digital junk rather than physical junk.

I also have to question whether the growth outlook for small form factor hard drives is as bad as some think. The hard drive makers are converting to perpendicular magnetic recording (PMR), which will help boost capacities of the tiny hard drives that compete directly with NAND flash memory for a spot in mobile devices. I'm not the only one who shares this opinion, as the following two quotes show:

PMR's greatest impact may be in its ability to enable one-inch and sub-one-inch drives to pack copious amounts of data for use in small hand-held devices.

PMR also gives the HDD [hard disk drive] a leg up on other storage technologies such as flash, which previously had potential to encroach on its territory in small handheld devices such as MP3 players and mobile phones.

Any guesses as to where I dug up those statements? No, they're not from Seagate. They come from (link opens pdf) Toshiba, a big manufacturer of NAND flash memory, in partnership with SanDisk (NASDAQ:SNDK). Despite Toshiba's commitment to NAND flash memory, it continues to invest in hard drive development.

If Toshiba sees a bright future for hard drives, maybe you should too.

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Fool contributor Dan Bloom owns shares of Seagate. Feel free to email him with your comments. The Fool leaves plenty of hard drive space for its disclosure policy .