This thing is priced like a development stage co. that is about to go out of business.
But it isn't. It's a grown-up manufacturing company with a fortress for a balance sheet.
It's selling close to cash ... because Mr. Market apparently thinks the revenue prospects are so bad that the co. will just burn most of that cash.
Mattson's strip business relies a lot on capacity expansion, especially in Asia, and everybody knows this is almost shutting down for a while worldwide. But it won't shut down forever. It's cyclical.
So the only question in my mind is this: is there any way for the down cycle to be so long that Mattson runs out of cash. With $40 M cash, they have the equivalent of 6 months of revenue in the bank. Maybe they can run out in a chicken little scenario, but a lot of other players will run out first.
Value stocks get a beaten down price for a reason, and those reasons are clear here. You just have to judge whether the stock price overly discounts them already.
A month ago, thinking the news in the semi equip sector was likely to get worse, I sold half my shares at 5, full of doubt, thinking I would surely regret selling at the bottom. I'm buying them back now in the 3's. Full of doubt again, but not so much. The slightly less than $3 per share of cash makes me much more comfortable buying at this price.
Worst case: somebody is going to stay in business through the botton of this cycle. I'm betting this co., now priced like it won't be one of the survivors, will in fact be one.
Best case: the down cycle ends within a year, new products are a hit, and I get a 5 bagger.
This is a true out-of-favor value play. Everything about it is out of favor. The whole stock market is out of favor. The small cap market is out of favor. The semi equip sector is way out of favor. Such things can be the making of a value stock. |
