We are exiting our position in Amtech Systems Inc (ASYS) at its $5.65 close yesterday because the stock is trading at a substantial premium to our valuation. We opened the position at $2.78, so we’re up 103.2% on an absolute basis. The S&P500 Index closed at 712.87 on the day we opened the position and closed yesterday at 944.74, which means we’re up 70.9% on a relative basis.
We initiated the position in ASYS at its $2.78 closing price on March 5, 2009 (see our initial post here). At $2.78, the company had a market capitalization of $25.3M. We estimated the liquidation value to be almost 60% higher at $40M or $4.40 per share. ASYS was trading at a little under two-thirds of our estimate of its value in liquidation, but, unusually, had continued to generate positive operating cash flow and earnings in a difficult operating environment.
Management seemed to have recognized that the stock was too cheap, and authorized a $4M stock buy-back. Our only criticism was that the buy-back could have been bigger. A private investor, Mr. Richard L. Scott, had disclosed a 7.0% holding in July last year. Mr Scott continued to purchase stock, and, as of February 17 this year, held 9.1% of ASYS’s outstanding stock. We don’t know anything about Mr. Scott, but we liked seeing a large stockholder increasing his stake when the stock price dropped. For those reasons, we thought ASYS represented very good value at a discount to its liquidation value and that’s why we added it to the Greenbackd Portfolio.
Full Disclosure: We have a holding in ASYS. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only. Do your own research before investing in any security.