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Technology Stocks : Cohu, Inc. (COHU) -- Ignore unavailable to you. Want to Upgrade?

To: Jerome who wrote (1423)	9/13/1999 12:49:00 AM
From: KLINVESTOR	Respond to of 7825

Jerome, While I think the split may help liquidity which could help attract more mutual funds along with individual investors that consider $47 shares to expensive I think Cohu's undervalued share price is attributable to several other things. Most importantly, I believe Cohu is very underfollowed by the investment community. This can be attributed to its lack of analyst coverage. There are a several reasons why they have minimal investment analyst coverage but the primary two are they have not needed to raise capital in years. Most investment bank analysts cover companies which they did an IPO for or companies they have raised debt financing through an investment bank. Cohu is so strong financially for their size (no debt something like $90 million of cash on hand) that the last thing they need to do is raise capital. Cohu also is not very proactive seeking analyst coverage. In the past their management indicated that they are trying to increase the coverage but their efforts clearly have not paid off. To have only two analysts covering in Zacks/First Call shows a lack of success in attracting coverage. A couple of years ago they had four analysts which is about the bear minimum for comfort to institutional investors I suspect. Another factor which impacts Cohu is their products which are well recognized within the industry are sold under two different names neither of which are Cohu. Delta Design and Daymarc. They sort of suffer from a name identity problem. On the positive side though Cohu is one of the most well managed smaller companies. While the sorts of AMAT attract tons of attention due to their size and market share dominance it is important to remember that Cohu is equally dominant in their sector it is just that there is a smaller market for semi-test handling equipment. Cohu earnings jump much more rapidly when the industry is rebounding. It trades an incredibly low PE and PSR and as noted has a stellar balance sheet. A per share comparison of finances of Cohu to any of the large semi-equips would show Cohu trading at half or less of the respective multiples of these companies and increasing sales and earnings at about the same rates. Of course the last year was a tough year but the next 2-3 years look to be excellent because there was such an underinvestment by the semi industry over the past year or so. As far as a 3 for 1 split they are a bit aggressive even with the 2 for 1 since if the unexpected price drop occurred they would not want to drop to the low teens as many funds then lose interest. Time will tell but I think we still have some good upside. Good luck to all.