Hi Chris,
My Euphoria makes me nervous? NOT!!! I bot Cohu in 1987. In 1989 I owned 6500 shares at an adjusted cost of 11.25.
That position now, would be 26,000 shares at 2.8125 and it is now selling for 32.625.
By the way their sales in 88 were 33,573,000 .
They made 1.03 in 1987.In 1988 ,their television equipment showed the most improvement and their kind of scrubby old "electronic test and detection equipment equipment showed sales and earnings slightly below prior years(sound familiar).In the third quarter of 1988 they "intoduced their first Pick and Place test equipment and "they resulted in most of the improvement in new orders and backlog at the end of the quarter".( sound like castle testerhandlers on direct Rambus DRAM Chips?)
What Cohu did was invent a test handler that could handle what was called a quad flat pack chip - it was an integrated circuit that had metallic prongs sticking out of all four sides.This being the case, gravity fed test handlers (the first of which was designed by a brilliant man named Nick Cedrone - Cohu's largest stockholder thru their purchase of Daymarc)no longer did the job.Some obscure company named Intel was trying to pack too many transistors into one IC and it required that prongs come out of everywhere.Well gravity fed testhandlers used gravity - so when the next ultra-expensive IC soon to be known as microprocessor came slamming into the chip before it,Prongs got bent, tests got failed, and yield went to * ell.In the electronics world ,you are in trouble when yield goes to *ell.
So Cohu used engineering genius to reinvent how complex IC's got tested without damaging them.This from a division ,that was purchased because they had expertise in keeping chambers cool and hot uniformly.(Part of chip testing requires uniform performance within temperature ranges).
You see people with money ,who are conservative and brilliant ,can accomplish great achievements.I reallly don't think James Barnes or Charles Schwan knew they had a tiger by the tail at this point.
Well the dynamic closed circuit TV is now 12 % , microwave and metal detection is 8 % and you know what- Test handling is still declining from last year(but it now is 80 % of sales).
The difference is ,these brilliant, conservative people keep staying up with the leading edge testhandler techniques - which serves the most dynamic growth industry, my baby boomer generation has seen.
Think about it - this is the beauty of it all - Every intigrated circuit must be tested.
Change size - need new testerhandler.
Change design - need new testhandler
Do you think the world of tomorrow will use more chips - some will fail - some will wildy succeed - All will need testhandlers! - win or lose they will need testhandlers!
The simple truth is these guys build the fastest(thruput) that runs the longest(without downtime)in every category of testhandler that exists.In my world that a pretty good niche!!! Best part is they keep reinventing new categories !
In the middle of all this downturn, Cohu announces a joint venture with Hewlett Packard which utilizes their castle pick and place test handler to test Direct Rambus DRAM 64 megabit chips (that Intel NEEDS to ensure the success of their pentiumIII chips).They seem to be so serious that they bot 20% of Micron and 10% of Taiwan Semi(somewhere around a Billion dollar committment)to make sure their new design can rampup in volume and leave AMD and CYRIX in the dust.
Am I nervous about this dynamic company that conservatively does business without hype ? Nope !
I just remember that Cohu traded at what was effectively 2 7/8 (at that time it was around 10 and it had a stock holders equity of 9.54)it has had 2- 2for 1 splits since.
Now its trading at 32 5/8 and has a book value of 14.09 stockholders equity with 8.92 in cash.I really doubt their knowledge ,land ,and buildings are worth just 5.17.Sounds like conservative people depreciating huge accumulated assets over a long period of time.
Am I nervous - No Way. I sold last time at 55. I think this time, I'm going to sell at 35 - but it's gonna take one more time of a 2 for 1 split!
Then I'm gonna wait for a big bad S.E.A. crunch(or what ever the spin is) to knock this great stock back down to 15 and buy it back all over again. HEHEHEHE!!!
JMHO
Bob
P.S. If your short get long - If your long get MORE
JMHO
Today it traded at 32 5/8 has a book value of 14.09. Sorry about the length but it is a great story. |
