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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Bob Rudd who wrote (20150)	12/2/2004 2:34:11 PM
From: Cressidaadr	Read Replies (1) \| Respond to of 78519

I believe Herb Greenburg may be influenced by some of those that are holding some of the large short positions in OVTI. IMO, I've learned to be suspect of anything coming from him. I've considered selling my position as I also have a nice gain. Yet for me, locking down that nice gain is not a good reason to sell. The company may be entering a sweet spot with their new product introductions so I'm going to try and stay around for at least another 6-9 months. The last Q's cash generation was impresive as well.

To: Bob Rudd who wrote (20150)	12/2/2004 11:58:41 PM
From: Madharry	Respond to of 78519

another great call. Congrats!

To: Bob Rudd who wrote (20150)	12/3/2004 12:06:17 PM
From: straight life	Read Replies (1) \| Respond to of 78519

In re:"OVTI - Bailed today with 70% gain. Herb Greenberg had a piece out expressing concerns about quality of earnings. Increasing competition, a difficult product transition and aggressive reporting tip the risk reward balance for me." From the OVTI thread: (Many thanks to Elroy) Herb Greenberg article Questioning OmniVision's earnings marketwatch.com. So I emailed the following to Herb. Wonder if he'll respond? -------------------- In your recent article on OVTI, you ask "why are investors bidding up this stock"? How about the following: 1- If you subtract the net cash per share of $4.48 from the stock price, and you use the next four quarters consensus EPS of $1.15, you get a forward PE of 13x. A similar calculation for the S&P 500 semiconductor stocks gives forward PEs between 18x (MU) and 33x (BRCM), with most of them in the 25x to 30x range. In other words, OVTI's PE is about half of its larger peer group. The stock could appreciate by 100% and then its PE would just be "in line" with its S&P500 peers. 2- Although the charges in the October 2004 were one time in nature, they represent reversals of earlier charges which depressed margins. So although the October results were artificially high, it implies that earlier quarterly results (I don't think they said when the earlier charges were incurreed) were artificially low. Net net, at some point they deserve credit for the actual results, and they are just realizing that credit in October. That's a good thing (basically, they won the lawsuit), not a bad thing. 3- You say "with prices falling and competition likely on the rise, the outlook for margins wouldn't appear to be bright". Well look at the last two quarters (July and October) where OVTI has experienced declining ASPs, declining overall revenues and competition (semis ALWAYS have competition), and gross margins have stayed FLAT at ~40.2%. That's fantastic considering they were going through a product transition! The current outlook (which is just an outlook, but what the hey?) is for RISING revenues, INCREASED contribution from 1.3 higher ASP megapixel camera phone image sensors, INCREASED contribution from the much higher ASP 5 megapixel digital camera sensor, and higher volumes of the newer products (likely yeilds improve as their manufacturing gets some history). This sounds like a recipe for increasing gross margins and increasing ASPs. Since the company was able to hold gross margins flat in the face declining revenues and declining ASPs, an increase in corporate gross margins seems a reasonable conclusion. 4- And then you ask again - "Which gets back to the question: Why in the world are investors bidding up this stock?" Well just look at a one year chart, and you will see that OVTI was ~$33 in December 2003 when it had just delivered $78 million in October 2003 revenues and 23 cents in October 2003 EPS. Now its 2004 and they have delivered $84 million in October 2004 revenues and 28 cents in October 2004 EPS, and the shares are 40% lower than their year ago level. Doesn't sounds to me like investors are "bidding up" the stock. PE = 13x ASPs and gross margins probably going up Industry area = semis for camera phones Operating margins around 24% What else in the world could one want in a tech stock? Message 20819329