Paul,
Weakness in price - all you have to do is watch any financial news TV show or read a column and the average investor would wonder why he owned a stock like Deswell. He sees the DOW and other indicators moving up and DSWLF losing, so he bails out to get into something that will move up. Makes sense if you don't follow the company. Also - funds have made good money to this point and have pulled out of the market to lock those profits in. They will not return to the market until after the year reports are issued. This is the reason for the very light market trading.
Warrants - Why would they convert? Have plenty of cash. If they call the warrants, they dilute the dividends. It's a $4.5M reserve they can call at anytime, but at this point that amount would mean very little. I don't believe they will call unless they get in a cash bind and that's not in the near future. However, at these prices I too would chose stock.
Competition - With all of the major companies investing in China, I believe the opportunities exceed risk of competition. Deswell is there, they have ample funds, and are in a position to take advantage of the China growth. One of their problems has been proximity to customers and the customers are now moving to them.
Currency - Deswell has been selling to the US, Germany, Japan, HK, and others, dealing in many currency conversions, selling products based on $US. A decline in $HK or Yuan would have little impact on revs and earnings and, unlike the problem with most Asian companies, have minimal impact on assets as they lease their properties.
Ardor is a good description of my feelings towards Deswell. Far better than 'irrational exuberance' because I see nothing irrational about my decision to go heavily into Deswell. We'll find out in February when the next report comes out in a bull market.
For what it's worth,
Ron |
