I have long believed there is a science to analyzing stocks. It's often an analytical process as well as an art form. I offer my perspectives on how I analyze a publicly traded company. Here's is what I use in the case of Quicklogic (NASDAQ:QUIK):
I'm usually looking to invest in a company that might be beaten down for no good reason. Two aspects I find critically important in evaluating my investment thesis in a technology company:
Technology leadership - I try to look at the future of the company to see if it can be a technology winner and will management know how to leverage its technology on a global scale. In this case, QUIK's technology is several products and services it will offer to a broad range of mobile devices. Did QUIK develop an efficient way of doing business? The answer looks to be, yes, as I will soon explain. It seems to have developed the best VEE/DPO technology available. It continues to build on marketing and distribution channels with partners and OEM customers.
Innovative ideas - QUIK is a small company that has demonstrated that it can change traditional thinking about display quality and battery life, which then can be adopted by the market. Innovation requires a company to have the financial and/or market strength to succeed. I look for game changing technologies or complimentary products to existing technologies.
QUIK has demonstrated that it can act on change by bringing to market products that have been quickly adapted to fit prevalent technologies such as mobile devices. I look at what is most meaningful for the long-term, rather than what drives the stock on a daily basis. I realize sometimes it's hard to look beyond the noise of good or bad news that can push the market up or down. As a long-term investor, however, I know that over time, great companies will produce wealth for their owners, but in the short-run it may not always appear that way. I usually look at my investment in the stock market as an investment on the future. Historically, the future is what concerns the stock market the most. The stock is usually driven by the future, even though natural or unnatural news can move markets and individual stocks up or down. Everyday, I find myself asking the same question, what will economic and political conditions today mean to create corporate profits or losses in the stock I have invested in.
With regard to QUIK my convictions were firmed in the recent Q3 2012 conference call, on page 3-4, when CEO Andy Pease in an exuberant way emphasized the future was bright for QUIK. Mr. Pease specifically stated:
"Let's take a moment to recap what I view as the important takeaways from this conference call. In the pico projector market the transition from Micron's Pop Video to General Imaging ipico projector caused an interruption in what I view as an otherwise very positive trend.
Beyond General Imaging we have also won several new designs with PDI and have solid interest from other major players. All 13 provisions of ArticLink III VX have been fully qualified and are available for production shipment. Based on our customer engagement experiences in Q3, we have made the necessary structural and process changes which are enabling us to execute more efficiently.
We have defined our ArticLink III VX strategy and more formally roll that out during Q4. Early results and customer feedback suggest this will be a very successful strategy for faster customer adoption of our VEE and DPO technologies.
We have successfully passed a critical milestone with our ArticLink II CX partner CertiVox and remain optimistic in the long-term potential for this highly differentiated program.
As evidenced by our first catalog CSSP launch with TI, our Smart Card activity strategy of working with application processor partners to better leverage our R&D across multiple opportunities is showing merit."
We know from experience that today's news could affect the market, but they have no long-term effect on the economy or business climate. Often one day's news is brushed off and market conditions return to the previous conditions. Investor's buy, if it looks like conditions will be favorable in the future. On the other hand, investors will sell if it looks murky. In Quik's case, the fiscal cliff has caused a temporary decline in stock price, which created for me an opportunity to back-up the truck (make that a semi-truck). However, once the fiscal cliff has been resolved, even if temporarily, the economic and political conditions will signal a significant change for the better, which the market will be the first to project into the future. Therefore, investors will buy, if it looks like conditions will be favorable in the future. Do you need to have a crystal ball or be able to predict the future? The good news is, no, you don't. We can pick a winning stock, like Quik, by focusing on the attributes it has to survive and thrive, given some uncertainties in the future.
QUIK has plenty of cash for the next several years to succeed. There is zero debt. It is nimble enough to make the appropriate changes quickly. The mobile device market is enormous and will remain so for the foreseeable future. Quik offers several products that have a value in many different global markets. Following the conference call, I took note of these significant changes that will affect QUIK's successful growth in 2013.
On 11/19/12 Quik solved a display mismatching issue to address customer requests:
"During the initial sampling phase of the ArcticLink III platform, our customers expressed a desire for a low-cost, display bridge-only solution for their short-term production needs while they evaluate our VEE and DPO technologies," says Brian Faith, vice president of worldwide sales and marketing at QuickLogic. "The ArcticLink III BX platform allows our customers to meet their bridging requirement early in the design cycle, while offering ample time to determine the value of VEE and DPO to their system at no risk to the design flow or time table."
On 11/26/12 Quik President and CEO Andy Pease announced the appointment of a new worldwide engineering executive:
"We are delighted that George has joined the QuickLogic team. George has a deep understanding of what it takes to deliver system level solutions. George has demonstrated the ability to build strong and efficient engineering teams that are capable of delivering the on-time, quality execution that QuickLogic needs to support the sales momentum we are building with our CSSP business model."
Quik launched a website in Japan that will allow Japanese customers and partners easy access to information on QuickLogic solutions for the growing handheld mobile market.
On 12/7/12 Quik demonstrated in Taiwan display solutions can extend system battery life, improve image viewability in bright sunlight, and provide a wide variety of customized bridging configurations.
On 12/12/12 Quick announced immediate availability of a new MIPI-DSI interface to LVDS display bridging solution for the Qualcomm Snapdragon processors development environment:
"We are very pleased to offer this display solution to the my DragonBoard community," said Mehul Kochar, senior business development manager for QuickLogic. "With this proven, working design, we've made it easy for DragonBoard users to implement the interface for their own displays and gain the immediate benefits of improved display viewability and extended battery life."
QUIK expects to showcase devices next month at the 2013 Consumer Electronics Show (CES) in Las Vegas. QuickLogic's products address common design challenges that mobile device OEMs face and offer features that create product differentiation within the market. Quik's hospitality suite will feature a variety of processor-to-display and processor-to-processor bridging solutions that solve interface issues, reduce power consumption (extending battery life), and greatly improve display viewability, particularly in bright sunlight.
QUIK's stock price of $2.34 per share is currently significantly undervalued. Under the circumstances, for the fundamental reasons stated above, Quicklogic's huge upside will either happen in 2013 or never. It's now or never. QUIK is strong buy, and offers an excellent opportunity to supercharge and diversify your portfolio at a bargain basement price.
Disclosure: I am long QUIK. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.