Regarding BRCM, don't you have a better short idea?
BRCM is a grossly overvalued strong company. If you
could find a grossly overvalued weak company, you
would have a better short.
Some facts: the current float is 4 millions shares
with a short interest of about 1 million shares. The float
will increase by a whopping 40 million shares in October,
but before you jump up and down, you should realize that
the 2 founders Henry Nicholas and Henry Samueli own
about 53% of the company, and other top insiders have
also a huge stake in the company. There are no VCs
since the two Henrys were involved in the PAIR startup
and made a big chunk of change that they poured into BRCM.
What I am saying is that you are going to see a very
orderly selling, not a big dump, after the share lockout ends.
Fundamentally, BRCM owes its exorbitant valuation to its
phenomenal growth rate, but even the company CEO has
acknowledged in interviews that this growth rate will
slow down. I figure that the company is worth between $25
and $30.
What edge does BRCM have? It has a lock on design of QAM chips
of the type encountered in cable modems, VDSL, and satellite
receivers. They are in essence a pure system on a chip
company targeted at high-growth communication IC markets.
Most BRCM boosters, including its CEO, tout it as the next
Intel. Wrong! There is not obstacle to entry in BRCM markets,
and over time they will be challenged on many fronts.
However, right now they are a really impressive company
and lots of semi investors are sitting on the sidelines
waiting to jump in if the price comes down significantly
(I would not mind jumping in myself at $30, but I am sure
most folks will not be that cheap).
The bottom line is that BRCM is not a good short because
businesswise, it has the wind at its back. If you must
short it, don't be too greedy and cover at $40. |
