Jerry-
I'm happy to see the offering of options. I was about to call the company this week and ask whether they expected options to be offered. I don't know if the stock will rise or not. I've seen volatility increase after stocks received options, as well as stronger downward pressure on the stock price. That might have been specific to those companies. I don't suspect that it will have a net effect on the long-term price trend of the stock.
I am glad, however, because I may consider partially hedging myself against my recently enlarged position in SMTC. I certainly wouldn't consider selling calls. That would most likely result in my loss of the shares (if the stock goes up).
I think the most prudent measure for a cautious SMTC shareholder is to buy more SMTC stock, and then buy some puts. That way, there is downside protection, and the only risk is the premium cost. Smart short sellers would buy puts, rather than short the stock, although smart short sellers would avoid SMTC completely, IMNSHO (in my not-so-humble opinion).
I read Intel's Q4 report, and it looks slightly favorable for SMTC, with regard to macro issues. INTC expects Q1 to be flat with Q4 in sales, although I suspect that unit sales will increase sequentially.
Even more importantly, Linear Technology (LLTC) released results today, slightly beating estimates. Although LLTC's sales are 4 times SMTC's sales, there are some similar product lines between the 2 companies. LLTC said that there was no material impact on Q4 from the Asian problem, but the company is closely monitoring its business for the next few quarters.
When MCRL reports in 2 weeks, we'll have a better idea how SMTC's Q4 is finishing up.
If TerfBall is still here, might I suggest that he short the September 17.5 call option on SMTC? Aside from buying puts, shorting calls is the most lucrative method of shorting a stock.
Another thing...
I want to reiterate briefly a few reasons that I recommend buying THQI, SMTC and LUFK right now.
1. They are all undervalued. I expect that an equal investment in all three stocks will nearly double by January 1999. These stocks are significantly undervalued, compared to their peer group, due to their small size, small analyst following, and a history of mediocre operations (THQI and LUFK).
2. All three companies will beat Q4 estimates. I expect THQI to beat estimates by more than 40%, LUFK by more than 30% and SMTC by more than 5%. All three companies will report earnings in mid-late February, and I suspect that each stock will react VERY positively to the report.
3. All three have great management teams that are focusing on increasing profitability and sales. Profit margins have been expanding in all three businesses.
4. All stocks are off of their 52-week highs, but were still good values at their peaks. LUFK is depressed because of the oil price plunge, SMTC is depressed because it's a chip stock, and THQI isn't really depressed at all, but it's going to blow away Q4 and Q1 estimates.
That's all. I don't make any commission by recommending these stocks, but I thought everyone here would benefit by buying these excellent companies in diverse industries. These 3 stocks make up well over a half of my portfolio, so it's clear that I'm comfortable with them.
Todd |
