Seeking Alpha
Long only, contrarian, special situations, value
Profile| Send Message|
( followers)  

One of the secrets of being a good investor -- and hopefully a decent columnist -- is to do a huge amount of research. There are very few weeks that I do not read 15 to 25 hours of both online and offline content related to the markets, economic reports, individual companies and industry specific commentaries. Sometimes good ideas can come from in-depth pullouts like the "Energy Upheaval" in May's Bloomberg Markets. Other times, they can come from blips in magazines or online financial sites.

One such "blip" I came across this weekend concerned TriQuint Semiconductor (NASDAQ:TQNT), a $6 component supplier to Apple (NASDAQ:AAPL) and other smart phone manufacturers. The firm has been a holding in my portfolio since it was selling at under $5 a share. There was a brief write up on the company in this week's Barron's.

The news -- Starboard Value has taken an almost 8% stake in the component maker. Starboard has had success in the past helping companies with various business lines that need to be run more efficiently or that needs to be restructured.

Key Metric -- If R&D and operating expenses could be brought back to the percentages in place in FY2010, the company's EBITDA would increase ~100%.

It remains to be seen how active Starboard will become with TriQuint, but having the activist with a significant stake in this underperforming tech stock is just one of many reasons to be positive on the long-term prospects for its equity price.

4 additional reasons to see value in TQNT at $6 a share:

  1. The company has a strong balance sheet with over $140mm in net cash (~15% of market capitalization).
  2. Insider buying has been active with myriad officers buying over 150,000 shares over the past six or seven months.
  3. Revenue growth is projected to accelerate from ~5% this fiscal year to ~15% in FY2014. Consensus earnings estimates for FY2014 have moved up in the last month as well.
  4. TQNT sells for just 8% above book value. Advanced 4G power amplifiers are selling well and the company supplies Samsung (OTC:SSNLF) as well as Apple.
Source: TriQuint: $6 Smart Phone Supplier Garners Interest From Activist Fund