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While this is one highly correlated market, with almost everything moving en masse for much of the year there are still pockets of under and out performance at the edge. I ran a screen last night on my typical pool of eligible companies (this excludes the very small caps below $300M, and those without liquidity - i.e. at least 200K average volume) and came back with 95 stocks that returned at least 50% year to date. I estimate that 6-8 of these were buyouts but that still leaves 85+ big time performers, in a market that is essentially just above flat for the year. (here is the screen if you are curious) Sometimes you can find some interesting new ideas by seeing where the money is flowing over the past 3 months, 6 months, year to date, etc.

Who was at the top of the list? $510M market cap Silicon Motion Technology (SIMO) at a 289% return. Never heard of it before last night but its a fabless semi company based in Taiwan which focuses on flash memory. (Company website here) They do have their hands in a lot of interesting markets however.

Silicon Motion Technology Corporation (NasdaqGS: SIMO) is a fabless semiconductor company that designs, develops and markets high performance, low-power semiconductor solutions for multimedia consumer electronics applications, such as mobile phones and smartphones, digital cameras, camcorders, notebook and tablet PCs, and personal navigation devices.

Founded in 1995 in San Jose, California, Silicon Motion is currently headquartered in Taiwan, with design centers and sales offices in Taiwan, Korea, China, and the US, and a branch office in Japan.

Silicon Motion has three product lines: mobile storage, mobile communications, and multimedia SoCs. Mobile storage products are composed of microcontrollers used in NAND flash memory storage products such as flash memory cards, USB flash drives, solid state drives (SSDs), and embedded flash solutions. Mobile communications products are composed primarily of mobile TV IC solutions and CDMA RF ICs. Multimedia SoC products are composed primarily of embedded graphics processors.

As we can see on the chart, even with a company up ~300% it's all about timing. The entire move came from January thru mid April.... and then in October. Between mid April and September, the stock was dead money.

This type of companies don't normally have a high PE ratio due to the cyclical business (and high competition) but SIMO seems to be in a narrow window of opportunity. At $0.94 EPS projected for 2011, the company has a forward PE of 17.6. 2012 is currently projected at $1.13. Last year's EPS was $0.42 so you can see it's been quite a year of bottom line growth. The company reports next week (Nov 1).

Last quarter showed some impressive metrics:

  • The company just reported second-quarter sales of $50.5 million for a year-over-year jump of 58%. On the bottom line, non-GAAP earnings per depositary share soared from $0.09 to $0.29.

While everything in this market nowadays is about guessing macro events, and front running central bank and government intervention (not very fun) it still is interesting to discover these individual stories.

Disclosure: No position

Source: Silicon Motion Technology Our Best-Performing Stock YTD