For his Venture Capital Aggressive portfolio, Covestor model manager Yinglan Tan invests in venture-backed equities with “predictable earnings and growth.” Tan averages 30 trades per month, and this portfolio’s current top holdings include the Nuveen Multi-Strategy Income and Growth Fund (JPC), Aruba Networks (ARUN), Silicon Image (SIMG) and Ebix (EBIX) (as of end of day 3/7/11).
On March 4, Tan added the position in SIMG to the model. SIMG creates semiconductor and internet protocol solutions for the storage, distribution and presentation of high definition content. ChartProphet on Seeking Alpha believes SIMG is a derivative play on the success of Apple’s iPad:
…SIMG has more than quadrupled AAPL’s performance over the past year – and that may only be the beginning. True, Apple is the top company; but it’s the smaller companies that stand to gain the most in stock price. And now that Silicon Image is linked to Apple, momentum may quickly build.
Not only is SIMG gathering momentum and looking pretty attractive technically, but its fundamentals are also promising:
- Small capitalization offers greater growth opportunities. With a market cap of less than $700 million, growth and stock price appreciation is much easier for a company like SIMG than for a huge company like AAPL.
- Reasonable P/E. With a forward price-to-earnings (P/E) ratio of 15.84, SIMG’s growth may still not be recognized by many investors. If the Ipad’s success really does help SIMG, a P/E of less than 16 is extremely low for such a promising stock.
- Lots of Cash and Zero Debt. With over $190 million in cash (nearly one-third of its market cap), SIMG is in a very favorable spot financially. That $190 million in cash is equal to $2.44 per share! That means that while the stock is near $9, you’re getting nearly one third of it in cash. Add to that the fact that SIMG has no debt on its balance sheet, and this is a very healthy company right now.
Seth Jayson at The Motley Fool compared SIMG’s margins to its competitors and concluded that SIMG is “doing fine”:
Here’s how the stats break down:
- Over the past five years, gross margin peaked at 37.3% and averaged 27.1%. Operating margin peaked at 14.2% and averaged 0.2%. Net margin peaked at 14.4% and averaged -11.5%.TTM gross margin is 30.5%, 340 basis points better than the five-year average. TTM operating margin is 6%, 580 basis points better than the five-year average.
- TTM net margin is 4.3%, 1,580 basis points better than the five-year average.
With recent TTM operating margins exceeding historical averages, Silicon Image looks like it is doing fine.
SIMG closed down 4.58% on 3/7.
Sources:
“Silicon Image: A Downstream Play on Apple’s Ipad” ChartProphet. SeekingAlpha, 3/3/11. https://seekingalpha.com/article/256284-silicon-image-a-downstream-play-on-apple-s-ipad
“Are You Watching This Trend at Silicon Image?” Seth Jayson. The Motley Fool, 3/4/11. http://www.fool.com/investing/general/2011/03/04/are-you-watching-this-trend-at-silicon-image.aspx
