Hi John,
I sold 10% of my current position today, in the last half hour of trading, for a solid 55% gain (before commissions+taxes). This was done mostly to free up some capital, as I was too low on cash in my portfolio. (I want to be able to try and take advantage of a few other opportunities in the near future). I will probably sell similar size lots for every 20 cent move up from here and I will be a buyer on serious weakness. My buy target has been moved up from the $0.70 area to the $0.80 to $0.85 range.
Listening to the conference call the other day, I didn't hear anything that would be a red flag. Their progress, while slow, is still steady enough for me to feel very comfortable, if not encouraged.
I think the stock is still under valued at today's price (by roughly $0.70 to $1.70/share), depending on the sector's strength going forward. It appears to me that we are seeing a slight improvement for the compound semis in the 2nd quarter over the 1st. Also, the few conference calls notes I've been able to read and the couple that I've been able to listen to have all suggested that we should see improving demand in the 2nd half of the year. Nothing to get real excited about at this stage but it is better than seeing demand drop off like we saw the past couple of quarters.
So, if demand stays muted, then I would use the lower end of my price target range to substantially reduce my position ($1.80). If the sector gets the pick up in demand that I'm anticipating, I'll probably hold onto most of my position until we reach the higher end of my range ($2.80). My main key for AXTI is still product demand, which is very soft at this point in time. The company will be burning through assets until they either reduce costs substantially or see demand improve. At roughly $4 or $5 million per quarter (for now), the burn rate isn't so high as to justify trading at less than 1/3 tangible book value. (in my opinion of course!) I could see a future scenario which has them selling or spinning off their opto division, since it seems to be a big drag on the bottom line at this point in time.
Best regards,
mh |
