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Strategies & Market Trends : Roger's 1998 Short Picks
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To: Dan Ross who wrote (2029)1/31/1998 2:24:00 PM
From: oexwa   of 18691
 
Dan, RE: ANAD and VTSS. I agree with you about VTSS being a good company, but the recent disaster in ANAD's stock convinced me to short VTSS. Both companies are involved in gallium arsenide circuits. While there are differences in the companies, they are generally talked about together. Some key numbers before and after Friday's debacle for VTSS and ANAD:

----------------------------- VTSS -- ANAD -- ANAD
----------------------------- 1-29-98 -- 1-29-98 -- 1-30-98
Price -------------------- 43.06 -- 33.81 -- 14.13
52 wk high ------------ 56.50 -- 54.25 -- 54.25
52 wk low -------------- 21.13 -- 21.00 -- 13.50
P.E. (TTM) ------------- 50 -- 27 -- 11
Price to Sales -------- 14 -- 5 -- 2
Price to Book --------- 5.9 -- 1.5 -- 1.2
Price to Cash Flow -- 39 -- 32 -- 11

ANAD's 58% haricut on Friday was attributed to the prospect of significantly lower sales in the next quarter that could result in a loss. This despite posting record sales for the fourth quarter and the year and exceeding earnings estimates. It's hard to believe that if ANAD caught pneumonia, VTSS wouldn't get a touch of the Asian Flu.

A similar re-evaluation of VTSS would bring it to the $14 to $20 per share range. In addition to the potential of lower sales, IBM is developing and licensing its silicon-germanium (SiGe) heterojunction technology that could make GaAs obsolete, as it runs faster, cooler and costs less. High flyers like VTSS can drop a lot if a key analyst revises his estimates.
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