Why I'm Cutting RF Micro Devices and Skyworks Further

Amazing - these 2 companies both preannounced (I & II) in the past month upside to consensus for their quarters and while trash stocks are rushing to the moon, these names are getting hammered. Wonders never cease. I'll admit to being flabbergasted here.

We said Monday there were a few names that we were slapping yellow caution on [Portfolio Positions with Yellow Caution Tags Attached]. These 2 were the most at risk - since then both RF Micro Devices (RFMD) and Skyworks Solutions (SWKS) have simply rallied into resistance, but then stalled/faltered. We need to see that change to offer more of our capital to these stocks.

I have to respect the price action, and these are the type of set ups I like to go short, not long. Since I like the fundamentals (which mean nothing) I am not going to short here, but just sell down the positions further in both until the market changes its mind. Which in this case means buying back into our positions at higher prices. I sold both positions down by about 40% today. I'll be more comfortable with prospects for each at RFMD > $5.20 and SWKS > $12.75.


Disclosure: Long RF Micro Devices, Skyworks Solutions in fund; no personal position

Comments

[agr8w8:]

You like the fundamentals which you seem to think are irrelevant to the trading and I tend to agree given so many stocks trade without regard to underlying fundamentals but i am curious as to what prompted you to select $5.20 as the value to re-enter.

Oct 08 08:46 AM

[agr8w8:]

Disregard the above question Mark, I was premature in asking. I read your other linked page and see the moving average at $5.20. I think I get it

Oct 08 08:54 AM

[kertch:]

I bought this stock early this year at $1.24, rode it down to 88 cents, and back up to $5.08 where I sold out. I bougth it because I know the company and the industry and thought the stock severely undervalued at $1.24. However, given the fundamentals, I just don't trust it above $5.00 and feel lucky that it went as high as it did. Granted that it's outlook has improved significantly, it can't really justify a price in excess of even $4.00 when it's traded between $6.00 and $8.00 during the boom times with far better top line and bottom line numbers. Eventually, this stock will settle into a more realistic price range when the anticipation of the "imminent recovery" is over. My opinion is that right now with RFMD you're just playing the market swings not the fundamentals.

Oct 08 02:54 PM

[TraderMark:]

Hi, around $5.20 it will have regained at least the 20 day moving average. Strange to see both stocks hit again today as the market was up.


On Oct 08 08:54 AM agr8w8 wrote:

> Disregard the above question Mark, I was premature in asking. I read
> your other linked page and see the moving average at $5.20. I think
> I get it

Oct 08 06:33 PM

[TraderMark:]

its at about 15x forward estimates (year end March 2010)
that is not egregious considering I see countless stocks now trading at 40-80x+ forward estimates in sectors with far less promising futures

But thats just my opinion and the market opinion matters more.


On Oct 08 02:54 PM kertch wrote:

> I bought this stock early this year at $1.24, rode it down to 88
> cents, and back up to $5.08 where I sold out. I bougth it because
> I know the company and the industry and thought the stock severely
> undervalued at $1.24. However, given the fundamentals, I just don't
> trust it above $5.00 and feel lucky that it went as high as it did.
> Granted that it's outlook has improved significantly, it can't really
> justify a price in excess of even $4.00 when it's traded between
> $6.00 and $8.00 during the boom times with far better top line and
> bottom line numbers. Eventually, this stock will settle into a more
> realistic price range when the anticipation of the "imminent recovery"
> is over. My opinion is that right now with RFMD you're just playing
> the market swings not the fundamentals.

Oct 08 06:34 PM

[makk:]

any change of heart with Intel earnings this evening? Gotta feeling we are gonna see chips, AAPL, RFMD and the like rally big tommorrow.

Oct 13 05:25 PM