NVDA..on the short side? If NVDA than why not CCMP and DPMI?
Nothing daunted, analysts and institutions alike still profess to
discover the one company that can buck the powerful trend. Like
NVIDIA, a graphic chip maker with a well-heeled following, whose
stock, despite a thumping Friday, is up handsomely for the year
(although down from its lunar high of 88 reached last June).
NVIDIA has been growing rapidly and boasts a balance sheet endowed
with cash. We came upon the company via the agency of David Rocker, an
old friend and proprietor of Rocker Partners, a hedge fund of no
little renown.
David is an astute judge of stocks and even buys a number of them.
But his true passion, for reasons we won't even begin to examine for
fear of running afoul of the strictures on practicing medicine without
a license, is shorting stocks, and he's short NVIDIA.
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BARRON'S: Up & Down Wall Street -2-
He thinks the company has caught the attention of the Street because
it seems to be meeting, even beating by a penny or so, its own lowered
estimates. And it's doing so, claims David, only by virtue of its
sales to EDOM, which in the latest quarter accounted for 30% of
NVIDIA's worldwide business.
So, we couldn't help wondering, what or who is EDOM. According to
David, it's a "Taiwanese board stuffer that supplies third-tier PC
manufacturers," the likes of Prolink and Gigabyte. These are not, he
observes, household names, at least in the Rocker household.
Absent the 38% gain in EDOM's contribution over the previous
quarter, NVIDIA would not have been able to report higher sequential
sales in last year's final quarter. For a junior growth stock, not
posting higher results quarter after quarter is absolutely
unacceptable to the bruised but still heavy-breathing crowd that
traffics in such stuff.
David, it won't surprise you, is highly skeptical that companies
like Prolink and Gigabyte will somehow escape the woe that has been
visited on Dell and Hewlett-Packard, for instance. As its customers
suffer, he reasons, they'll exact price concessions from suppliers
like NVIDIA. The stock is selling for 43 times last year's earnings,
which, insists David, is "a steep price to pay for a supplier to a
troubled industry." |
