| From: tktrimbath | 6/30/2016 6:12:04 PM | | | | | | My mid-year review of GIG
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.
GigPeak (was called GigOptix which was called Lumera which was spun off from MicroVision)
GIG (market cap was $0.135B EOY2015 is $0.111B mid2016)
GigPeak is a producer of high-end electro-optic communications switches. Through a variety of technologies, some of which have few moving parts, they are able to produce and sell the switches that allow the very high speed Internet connections that are considered necessities (that only a few years ago would have been considered luxuries). They have a few competitors, but many of them rely on complicated devices with moving parts that begin to encounter physical material limitations. GigPeak's products are the sorts of things that managers may not understand, but that the technicians can best appreciate. The result is a different kind of marketing, which is probably similar to the early days of f5. The products sell on technical merit more than on marketing splash. They have recently become profitable, but just barely, which produces a very high Price/Earnings ratio of ~ 40. If the trend continues, the company and the stock should attract more investment attention.
Two main issues make it less appealing for major investors. The company continues to grow through mergers and acquisitions, which confuses the financial reports. The company also has a relatively small valuation, which is under the limit for some firms, and which also limits the amount of funds a major investor can deploy. There are probably similarly-sized companies with simpler finances and technologies, which are easier for analysts to deal with. The financials are improving, but those two hurdles may limit the demand - until a major investor acquires a major holding, in which case others will possibly join in. Of course, that's one of the scenarios that makes investing in tiny companies a profitable strategy - if it happens.
I will continue to hold because my patience may finally be rewarded. I probably won't buy more because their growth strategy increases my confidence in the specifics of their operations. (Another bit of evidence that increases my doubt is the drop in the stock even the revenues are rising.) I also already have a large enough holding that if they maintain their roughly 20% growth in revenue, and if they attain a price/sales of ~6, then in about three years the stock could see a five-fold appreciation.
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 |
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| From: tktrimbath | 7/30/2016 11:06:39 PM | | | | | | Choosing GIG over MVIS - cross-posted with the MVIS board
I continue to hold almost equal numbers of shares of GIG and MVIS, which have a common heritage. GIG seems to be doing more with it than MVIS. Here's a description of how I resolved the dilemma I wrote about twelve months ago.
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| From: tktrimbath | 8/12/2016 11:13:37 PM | | | | | | Buying a bit more GIG was a bit more than buying a bit of a stock. It may act as a milestone in a personal recovery.
Here's the longer version of the story.
http:// |
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| From: tktrimbath | 10/21/2016 12:12:16 AM | | | | | | Rather than fill discussion boards with thousands of words, I prefer to post a few and add a link.
What's GIG worth? Someone over in Investor Village inspired at least a quick exploration of one possibility.
At 50+% growth and a market cap one-tenth of some of its competitors, there's at least some reason to think they can grow fast and go far.
trimbathcreative.wordpress.com |
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| To: tktrimbath who wrote (132) | 10/26/2016 6:26:47 AM | | From: squareroot | | | | | I think your expected growth rate is a tad high. Much of the growth in revenue is due to acquisitions and is not organic and the downside of acquisitions is the additional shares outstanding that impact EPS. I don't know what their true rate is but GIG looks decent here for a longterm hold with positive cash flow. Earnings release did not cause any excitement for the stock so it looks like it will trend lower for a bit. I'm waiting for $2.25 +/- to enter. BTW, love your blog! |
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| To: squareroot who wrote (133) | 10/26/2016 10:59:01 AM | | From: tktrimbath | | | | Thanks for the perspective. Usually investing in small companies avoids such M&A messiness. Always surprised when they find yet another small company to M or A.
Glad you like the blog. Looking forward to writing about good news. |
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| From: tktrimbath | 11/30/2016 9:54:43 PM | | | | | | I wrote a general, personal investing, post about PE ratios, and used GIG as an example. If you are on Silicon Investor, it is old news though there is a histogram of PEs for small caps you might find interesting.
Small Cap Price To Earnings Reality
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| From: tktrimbath | 12/31/2016 9:07:53 PM | | | | | | My end of year review of GIG
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.
GigPeak (was called GigOptix which was called Lumera which was spun off from MicroVision)
GIG (market cap was $0.111B mid2016 is $0.171B EOY2016)
GigPeak is a mini-conglomerate within a narrow high-tech niche. I know them most because of their very high speed electro-optical switches, the very things that are needed to translate electrical signals into optical signals and the reverse.
Electro-optical switches are one of those things that most folks prefer to ignore because life is easier that way. High speed electro-optical switches, however, are what make the high speed internet work, streaming easier, cloud services efficient, and generally enabling modern life. GigPeak has competitors, but as the speeds increase, GigPeak finds itself with less competition. A growing market, esoteric tech, some diversity through many tiny mergers and acquisitions, and the result is a company that is hard to understand in a possibly profitable field. Technology can be fickle because inventions happen, but at least for now I view the company favorably.
The company flirted with profitability two years ago, and has now achieved it. The financials are confused by the M&A activity. The technology confuses most non-technical people (and I only understand it a bit more than most, but am not an expert.) If they continue their growth trends and sustain profitability, they could pass from being an unknown with no profits to a well known if poorly understood growth stock.
I continue to Hold, and probably won't buy more because on good days it is already one of my largest holdings. I am remiss in not quantifying a proper valuation, though it is hard to imagine such a critical company being only worth a few hundred million, and currently it is valued at less than two hundred million. Simply getting up to a Price/Sales of 6 would be a 38% appreciation, something I think undervalues their growth and competitive position.
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 |
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