Panco Villa,
I have read almost ALL of your posts, and I respect your opinion. I do not yet fully understand the short aspect of investing, any input you could give would be greatly appreciated. I am a long-position investor, with a goal of owning any issue I purchase a minimum of 18 months, to reduce my tax consequences.
Typically, I spend about 100 hours looking at each company before buying any stock. I know this may sound like a lot, but it has the advantage of very low on-going maintenance (except sometimes looking for a bigger wallet :o)
I select micro to small cap companies, either in the pre-growth stage (sometimes identified by bottoming margins), or that are making a come-back with a new management team. For example, I have made only 5 buys this whole year (SMTC, INTL, THQI, TBAC, and QWST). I expect all these to provide me a minimum return of 200% return over a 18 month to two year horizon. I would really appreciate the person who lays down the fundamental issues, strategy, and tools involved in short positions.
I humbly pull my head out of the ground to provide input on SMTC, which before all is said and done, will be a 10-bagger for me. I can handle that! Tell me what you think of it, I have come to value some opinions on this thread :o)
SMTC ANALYSIS
I have reached the same conclusion as before, this baby is in very good shape. It is reasonable to expect the damage it has sustained, because it had come up so far. I think that the price drop is a challenge to SMTC, which forces them to prove they are legitimate, or face the consequences.
What right does any company have to grow 500% so fast unchallenged? AOL is in the same boat as SMTC, but at least SMTC has some fundamental weapons at their disposal. I'm done worrying, if these numbers don't support my choice, I don' know what will.
a.Zacks rating remains "Strong Buy" despite results of this week
b.P/E is 29.70 (or 25.40 on FY EPS estimates) vs. induistry average 28.6
c.Estimated Q3 earnings up 51.61% from prior year ($0.47 vs $0.31 per share)
d.Return on Equity is 30% vs. industry average 16.2%
e.Net profit margin is 13.5% vs. industry average 7.1%
f. Debt/equity ratio is 0.03 vs. industry average 0.21
g Quick ratio is 2.1 vs. industry average 1.0
h Return on assets is 23.2 vs. industry average 7.6
i. Return on capital is 29.4 vs. industry average 13.4
j. Cash in hand past 3 years (8.3M in 97, 6.0M in 96, 2.8M in 95)
k.Total assets past 3 years (41.6M in 97, 32.7 in 96, 19.0M in 95)
Their numbers compared to the industry support paying a premium for SMTC based on good behavior, but this is not reflected in the current price.
In all fairness, In a sea of good news I did find a couple potential
problems:
a. Inventory levels have gone up the past 3 years (but it has grown in a smaller percentage than sales have in the same time frame).
b. An un-named group of affiliated customers & sub-crontactors provide 10% of net sales (it is rumored to be Hughes Electronics).
c. Shipments to customers located in the Asia-Pacific region were 30% of net sales
But, back to the good news:
September 17, 1997
SEMTECH CORP (SMTC)
Quarterly Report (SEC form 10-Q)
a. "At August 3, 1997, Semtech Corporation (the "Company") had working capital of $30,722,000, compared with $24,036,000 at January 26, 1997 - an increase of $6,686,000 or 28%"
b. "During the first half of fiscal year 1998, the Company used cash of
$3,017,000 to pay for capital equipment purchases".
c. " Such investments aimed at developing additional new products,
including the addition of many design and applications engineers and
related equipment, will continue". And... "The Company plans to finance these investments with cash generated by operations and cash on-hand".
d. "Company's product offering and penetrating new applications. Notebook computers, cellular handsets, communications and industrial applications are specific examples of new design efforts".
e. "Revenues for the second quarter ended August 3, 1997 were $21,634,000 compared to $13,424,000 in the second quarter ended July 28, 1996, an increase of 61%".
f. "The Company estimates that shipments made during the second quarter of fiscal 1998 were for use in the following end-market applications: 48% computer, 15% communications, 12% industrial, 14% military and aerospace and 11% for foundry services."
g. "In addition to positive new order trends, the Company has seen
increased design win activities associated with the introduction of new products. .
h. "The Company has added a significant number of key employees and related infrastructure over the last twelve months designed to support the long-term growth of the Company. For the first six months of fiscal year 1998, the Company has added a significant amount of technical resources, including the addition of seven designers, seven field applications engineers and several key strategic marketing and operations individuals".
Research on financials are fully detailed at the following URL:
edgar-online.com
This is the kind of drama that occurs when something signifigant is about to happen. There is nothing that I can do to affect the outcome, but based on digging SMTC remains a "strong buy" for me too.
The downside risk of holding SMTC, especially based on current price levels, is negligible when compared to the risk presented by selling a long-term position in SMTC.
Tom Cat will probably recognize this message, since I originally posted it about a week ago on the SMTC thread. Thanks for any information or feedback you may provide, hope you have a great weekend.
Regards, JB |
