RtS (re: compound semis),
thx for the kudos but unlike many "insiders" here I too don't have an engineering or "field" background. However my daytime job as an IT consultant had helped me to gain insight into the matter. And yes I have always been fascinated by semis.
Understand you with the "tried and true" approach. The only problem here is that valuations are really hefty here too. My favorite ratio is usually price/sales in conjunction with gross margin and trends. Now when you arrive at a PSR of 10+ in the midst of a "tech recession" that sends a signal to me. For this reason I went out to find those tech bargains instead. This worked very well in 1999 and 2000 when I found those laggards that suddenly staged impressive market share gains in their select fields.
The new FCS had is roots in power semis I think. Then they bought out a compound semi fab shop called QT Opttronics or QT Optera which made HB-LEDs among other products. There are a lot of parellel universe in semiconductors. You could segment the market space according to a number of variables: like materials used, target markets etc.. Usually firms try to grow in a sheltered fab-less environment first ("protected niche") then as they grow they add processing (front end) capabilities in their domains. Later when they morph into midsize companies they start out and buy complementary presences in fields they are not yet active to reduce risk - more or less opportunistic.
Usually my research starts around a "theme". In the eve of 1999 I intensely researched everything connected with photodiodes. I noticed that JDSU had acquired a maker of avalanche photodiodes for more than some $100m back then. So I found tiny unknown firms and secondary plays back then: PKI, MSCC, ANAD, FCS, API, METHA/STLW before spinoffs, OSIS. This research paid off very well. Many stocks on a "single theme"
Plowed money between them (one after the other) but more as an investment than a trade. I used PSR as entry indicator, buying when PSR was low (preferably below 1). In this process I learnt a lot about the listed firms in compound semiconductors. I even got myself dedicated newsfeeds on all those compounds (no kidding).
Most recently I noticed that ATML and ONNN (somewhat shaky) have acquired SiGe capabilities. I view this as very significant as SiGe could become the material of choice for the "easier" (non cutting edge) part of high bandiwidth components, say below 6 GHz. And a tiny outfit called Simtek on the OTC/BB (SRAM.OB) also acquired a SiGe shop called Q-Dot Inc.
Then a tiny semi equip company called Intevac (NasdaqNM: IVAC around $3) branched into Photodiodes also. They could be interesting because they are now offering a 40GHZ model. This firm is associated with the former corporate base of Varian and Kaiser Aluminium (where parts of their divisions came from).
Finally I started to post here on this thread recently in order to obtain some feedback on Japanese techstocks (in semi and semi equip sectors) that have reached close out valuations IMHO. Firms like ANDO, New Japan Radio, Hitachi Cable, Nippon Sheet Glass , etc.. Posted some research info on the Nikkei/Japan thread..
all the best
CROSSY |
