Tech stocks took a pretty good hit the first week of April. The stocks have moved up pretty aggressively in the last year, so they were due for a correction.
We sold a small amount of Finisar (FNSR) to raise the cash level in the portfolio. The stock has been moving up nicely. My plan is to buy some low priced stocks with the proceeds. This follows our strategy of selling stocks that move up substantially and buying lower priced stocks that in my opinion may have significant upside potential.
On April 11, the Gehman Capital Solutions Undervalued Growth Companies portfolio was up 17.7% for the last 365 days. It has taken a lot of conviction to stay with these small companies in the difficult prior years. I believe the selloff that we are seeing in April could continue a little longer. In my opinion, it is possible our stocks may move to higher levels in the next few months.
On April 1, TowerJazz (TSEM) announced a joint venture with Panasonic Corporation. “This joint venture and partnership brings together two leaders (51% TSEM, 49% Panasonic) to create a company that will serve and grow the analog foundry space as no existing single foundry company can,” according to TowerJazz CEO Russell Ellwanger. Panasonic will become a minority shareholder in TSEM.
Panasonic will transfer semiconductor manufacturing capacity to TSEM and will commit to acquire products from their joint venture for at least five years. I have no way of knowing for sure, but assuming everything works out as planned TSEM will increase their revenues by at least $400 million per year and will be able to save $130 million per year by closing one underutilized plant.
Rivershore Investment Research analyst Rick Neaton, in his April 3, 2014 newsletter (subscription needed), gave us some very good information about Samsung’s new GS5 smartphone. Even though QuickLogic (QUIK) and Anadigics (ANAD) products were not in this version of Samsung’s phone, the news was not negative.
QUIK’s sensor hub revenues were not expected to start ramping until the second half of 2014. The stock has been a little lower in April, but that could just be the weakness in the tech sector.
Anadigics (ANAD) stock was hit pretty hard recently. The stock was trading above $1.90 in January 2014, but closed at $1.58 on April 4, 2014.
“Although ANAD is not found in the phone examined above (GS5), we may still find them in the CDMA version for the US. These reports, however, likely explain the recent weakness in ANAD shares. ANAD is oversold today (4/3/14). Buying ANAD on weakness is a good strategy,” according to Rick Neaton.
I intended to buy a little more ANAD with some of the proceeds from the FNSR sale.
Nokia (NOK) is not a small cap company, but I believe the stock may possibly trade higher later this year. I have no way of knowing this for sure, but I believe that Microsoft (MSFT) might complete its purchase of Nokia’s mobile phone business unit within a reasonable amount of time. If so, this sale will provide Nokia with a great deal of cash to formulate their new business plan and possibly start paying a dividend again.
I am considering adding a little more NOK with the proceeds from the FNSR sale.
DISCLAIMER: The investments discussed are held in client accounts as of March 31, 2013. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable. Past performance is no guarantee of future results.
- Gehman Capital Solutions, Ltd. is an investment management company based in New York City. Gerald P. Gehman founded the company to search for, and buy securities at prices significantly below their long term valuation level.