The world of semiconductor and electronics investing isn't for the faint of heart. When dealing with high-technology products you can't directly observe, determining one company's competitive advantage over another requires a pretty steep level of expertise. To make matters even worse, electronics and semiconductor companies often make products at razor-thin margins and operate in a heavily cyclical field. Investing in the segment requires patient research, and in the end it's often more heartache than fun.

However, there's a few compelling value propositions right now that are priced low enough to warrant a look under the hood. If you look at the chart below, each stock is trading at levels extremely close to the company's net cash on hand.


Market Capitalization Less Cash

Total Market Capitalization

Trailing 12-Month Earnings

Vimicro (Nasdaq: VIMC)

$64.4 million

$177.6 million

($16.5 million)

Nam Tai (NYSE: NTE)

($7.7 million)

$189.1 million

$4.4 million

Actions Semiconductor (Nasdaq: ACTS)

($47.3 million)

$186.6 million

($9.8 million)

Source: Capital IQ, a division of Standard & Poor's.

In an all too easy world, you'd have some guaranteed winners on your hands. Hypothetically, if you liquidated Actions Semiconductor and paid out the cash to shareholders, it would net them the positive difference plus any other asset gains.   However, there's often extenuating circumstances in these situational value plays. Management can destroy value trying to turn the company around, eroding large cash balances. In addition, the cash situation might not be accessible for other reasons such as large shareholders with their own interests. More than a quarter of Vimicro's stock is held by venture capital firms, for example.

With that in mind, let's take a deeper look at these three cheapies to see if any of them are worth your investing dollar.

Nam Tai
In recent years, the diversified electronics maker's revenue has fallen off a cliff. However, to its credit, aside from one rough quarter at the end of 2008, the company hasn't experienced the corresponding massive losses you might expect. In fact, it managed to eke out a small profit in the past 12 months and has kept its cash balance stable. Nam Tai competes in a very price-competitive industry with large companies Jabil Circuit (NYSE: JBL) and Flextronics (Nasdaq: FLEX). Unfortunately for Nam Tai, the fortunes of its rivals' operations look much more promising. Both Jabil and Flextronics reported much smaller sales declines relative to Nam Tai in recent years, and the two larger competitors are poised for strong growth moving forward. 

Traditionally, the company has focused on processors for PC cameras. However, faced with stifling competition, it has expanded into multimedia processors for mobile phones. The company's multimedia processors target a lower niche than competing products from Broadcom (Nasdaq: BRCM), which offers advanced high-definition features, but Vimicro is positioned well to compete in the domestic Chinese market. Vimicro has aggressively expanded its research and development budget in recent years, with the total soaring to 35% of sales in the past 12 months. If the increased research spending can once again push Vimicro past competitors in webcam processors and create a niche for the company in multimedia processors, its fortunes could turn in coming quarters.

Actions Semiconductor
Relative to its cash, Actions Semiconductor is the cheapest of the bunch. Actions specializes in systems-on-a-chip (SoCs -- a single chip that combines multiple components) for portable media players. However, as smartphones begin adopting many of the features seen in portable media players, the future viability of these products looks shaky. Because of this transition, Actions faces an uncertain future because it has to retool its product line to target its chips to mobile phone operators. With a crowded set of competitors and management that has been slow to reorient its product lines, it's not surprising that Actions trades at such low levels.

To wrap up
So there you have it. When it comes to the underlying business, Vimicro looks to have the most turnaround potential of the three, but the company comes with more significant risks and less of a "safety blanket" because of its lower cash balance.

If you're looking for a value play based on a strong balance sheet, I'd actually prefer Nam Tai over Actions Semiconductor. Nam Tai not only has high levels of cash, but has valuable assets as well, and doesn't have to overhaul its operations as much as Actions Semiconductor.

Of course, before putting your investing dollars to work, do your own research. If none of the companies interests you at current prices, they're great watch-list candidates. If the business starts turning and the stock price doesn't get too out of hand, a buying opportunity could pop up around any of the three.

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Eric Bleeker doesn't own shares of any company listed above. Nam Tai Electronics is a Global Gains choice. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.