There is a lot of fear in this market. Be like Buffet...be greedy when others are fearful.
I wrote this in response to some fear mongering on the Yahoo site, trying to instill fear that weakness of auto sales will bring down RMTR.
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First of all, as in this presentation, autos only account for 18% of RMTR revenue. Also, the number of FRAM per vehicle keeps increasing which will offset a slowdown in unit sales.
ramtron.com
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Secondly, as Walmart has done better in a recessionary environment than the more expensive big-box retailers, so should more budget/economy-focused cars like Hyundai-Kia that represents most of RMTR's sales in this space. As you recall, Hyundai-Kia is rolling out RMTR's products in ALL models. In Q1 2008, RMTR reported that "our business with Hyundai nearly doubled from the fourth quarter of 2007 alone"
Although Hyundai sales are down in the US in Sept by 25% year to year (i.e. 33,020 to 24,765 units), sales elsewhere in the world are increasing. To show you the magnitude, in India, sales rose 68% from 27,517 units Sept 2007 to 46,222 vehicles in Sept 2008, more than offsetting the US decline. India has been on fire for Hyundai - you can check the numbers going back several months. 57.5% growth in August, etc. Hyundai sold 1.5M cars globally in the first half of this year and expects to sell more than 530,000 vehicles this year in India alone.
United States theautochannel.com
India
in.news.yahoo.com
Bolstering the theory that it's not all bad in the US, sales of Sonatas have risen 31.7% from last year. It's the sales of gas-guzzling SUVs that have declined. They are changing the mix of cars.
blog.al.com
First half Global Hyundai sales
arabianbusiness.com
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Thirdly, the thing to remember, is that RMTR has a well-diversified revenue base. And their customers have been launching new products that will bring growth, offsetting any slowdown seen elsewhere.
In computing, the big driver is printer cartridges - specifically generic printer cartridges. Their major customer in this space is just ramping up and is a generic cartridge manufacturer that has found a legal way - using RMTR's FRAM - to bypass the chips used by major printer manufacturers to prevent the use of unauthorized cartridges. In a recessionary environment, why pay OEM prices when you can go MUCH cheaper with a generic? I know I do.
In utilities, these SMART meters make utilities more efficient with the costs of the program built into the highly regulated utility-rate base. Smart meters are the present and future of the energy industry with FRAM designed into many leading AMR designs.
In industrial controls and medical devices, this is a burgeoning growth area for RMTR where they are going from low to no market share and replacing incumbent sockets. Increasing market share from a low number, even with declining overall industrial sales, will still yield growth.
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Fourth, although there is fear of the unknown in this product liability issue, let's cover the facts. It involves less than 100,000 units of a cheap, early FRAM part. RMTR has product liability insurance for exactly this reason. And the manufacturer has admitted it was at fault for the manufacturing defect. RMTR did not throw out a number on liability to be conservative because they simply did not know at the time. But with the facts, there is reason to believe that the charge will be doable.
RMTR investors should realize that $2.32 for this stock is cheap and has many downside scenarios built in.
- RMTR is profitable. We are gaining operating leverage as revenues increase and are at the cusp at which stock option expense and fixed expenses will become less significant, allowing EPS to jump sharply.
- RMTR has a strengthening balance sheet
- RMTR has a diversified revenue base and has guided revenue growth higher to 26-29% year over year recently with a near term target of 30-35%
- FRAM parts (1+ Mb) with MUCH higher average selling prices in the range of $10 per FRAM are coming online in a variety of ramping end-products that will drive revenue acceleration even faster.
- Gross margins (hence potential for profitability) are top quartile at 52-53%, higher than industry leading Intel that has 50% gross margins and less than 10% yoy growth.
- RMTR is a growth stock that should rebound with better market conditions.
Although JMO, I am and have been a net BUYER of Ramtron stock here, anywhere here from $2-3 per share. I am not selling my shares because I believe there has been a concerted effort by others to get the stock down here to load up.
I have owned this stock for 13 years and have gone up and down with this stock many, many times, including many near-death experiences. I know this company very well. There has not been a time in the Company's history as right now where the fundamentals have looked this good and where the risk-reward is this favorable, especially with this haircut. Good luck and don't say I didn't tell you!
Tom
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