|INTRO Here's my semi-annual exercise to see if I remember why I own the stocks I own, and so I can check back and see if their stories have changed. I post in case it helps others too.|
GIG (market cap was $0.033B EOY13 is $0.043B mid14)
GigOptix is a high tech electronics switch manufacturer selling the kind of switches that are rarely noticeable to Internet users, but are necessary for the high bandwidth expectations we inherently have behind streaming video, uploads and downloads measured in seconds, and nearly seamless connectivity. The technology is sophisticated enough that any description begins to use terms like "organic" in ways that have nothing to do with farming. The company is also somewhat of a mini-conglomerate with a long history of mergers and acquisitions despite its market cap. At least on a technical basis, the expansion of the product line seems reasonable.
GigOptix's stock, which is GIG which was GGOX which I acquired from an M&A with LMRA which was a spin-off from MVIS (An earlier post describes the progression. trimbathcreative.wordpress.com trades at price/sales and price/book of less than two. Such low multiples are counter to what I expect from such high tech firms in growing markets. It is possible that the M&A activity continues to confuse the books enough that analysts look elsewhere. It is also highly likely that irregular revenues are also discouraging. Extrapolating the profit (loss) trend into next year suggests profitability, an event which usually draws attention and investor interest. M&A accounting can cloud that improvement.
The upside is that large companies start as small companies, and GigOptix has potential to grow as the market grows and as the bandwidth requirements increase, which increases GigOptix's market niche. Few companies can compete with GigOptix's technology.
The downside is that such a small company may stay small, either from the lack of economies of scale, or from competitive pressures from larger companies with larger sales staffs, or because the company's performance meets or exceeds management's corporate and personal goals. I won't fault a person who is content making over a quarter of a million dollars per year in a fashion that is sustainable, which may describe the CEO. Of course, I want my stock to appreciate and make my life easier, but how many times have we faulted managers for greed that far exceeds a "few" hundred thousand a year. An interesting take on perspective.
DISCLOSURE LTBH of LMRA since 2004. Holding because I have enough shares to positively impact my life, but not so many that I feel too exposed to risk. (I've also collected links to the other discussion boards and my other stocks over on my blog trimbathcreative.wordpress.com