Seeking Alpha

David Shirk's  Instablog

David Shirk
Send Message
A Network Engineer at one of the worlds largest ISPs. Spent two years as a licensed broker from 2003-2005 at Montauk Financial, and then at L.H.Ross. Had to leave position due to getting deployed. When I returned from overseas, I decided to enter a bit more of an honest business.
View David Shirk's Instablogs on:
  • ANAD: Proving Turnarounds Are Possible
    When you have a company like ANAD (Anadigics), it is very easy to fall into the trap of ignoring the successes of a company with a bad track record. Once bad always bad being the mantra of the doubters. So the company recognizes the reasons it failed in the past (like relying on legacy hardware as a prime source of income), and comes back with a vengeance to produce cutting edge technology in their sector at a reasonable price. It restructures its management to aid in meeting these needs. It starts reaching out to high end companies that have a great benefit from its product, and gets their business. Now when a stock is smashed to a near all time low, and news like this develops, it is music to my ears. Is it a safe long term play for someone looking for capital security? No. It is however a growth stock with very high potential. Yet to many people, companies that have failed in the past are always failures and do not deserve their time of day. I wonder if anyone remembers the AMD heyday when they reigned and Intel only existed in low end Gateway systems and the like. Yet after AMD fell into the trap mentioned earlier, it is now looked at as yet another failure story. What poor memories investors seem to have. So here we have ANAD, a comeback story. Surging back into the higher echelons of wireless technology, doccsis 3.1 for cable, and a myriad of other high end receivers, ANAD has proved that when it comes to delivering a great product, they still got it. 'But the competitors offer the same thing and have more resources' - another mantra of those who don't bother to look at who is buying the new product line, or even what the new line entails. ANAD has no problem delivering a good product - just ask Samsung or Huawei. As to the resources end, it is the same issue. A company does not simply just start making higher end products - it spends resources in R&D, manufacturing, and sales. Instead of seeing the smaller amount of resources as a good thing due to the higher profit return, the doubters focus on the smaller resources being a sign of weakness against competitors. Very poor reasoning when you think about it. Finally, the Quarterly earnings come out, and they beat their expectations with solid reasoning given. Once again the doubters pop up with the same played out arguments 'but the competitors…but the resources…. They must be cooking their books'. Somehow someway, the high end players on the street take that side - as always with the exact same wording. In addition, they use information they already knew long before the disparaging comments, and ignore the progress made. Now yes, ANAD has obstacles to overcome - that is a given and one should be aware that it is not out of the water yet financially. Yet ignoring the progress made in shrugging off these past issues is ok for an investor who never looks any deeper than the headline, but it is irresponsible for the usual suspects to continue their games on such matters. I think from here on in I am going to wait to buy stock until all of the 'smart money' and 'must reads for the smart investor' gets their nonsense out of the way. I am sick of them finding stocks like this, smashing the price down, and then buying right before it spikes back up to where it should have been. The 'smart money', and 'must reads' have spoken their piece, and it's about time ANAD finally gets some much deserved appreciation. If it even comes close to maintaining its recent successes and follows its current guidance, than it will do very well indeed.

    Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in ANAD over the next 72 hours.

    Aug 09 5:49 PM | Link | Comment!
  • AMD's Greatest Obstacle - The Street

    A few months back I was dawdling on some message boards and feeds trying to get more information on the Steamroller based AMD chips - When would they come out? Would they be worth the wait? What would make them any different than bulldozer or pile-driver?

    Either way, the message boards were for the most part excited about the newest offering (not to be released until late this year Q4). AMD has always held a solid niche in the PC market (minus the embarrassing bulldozer CPU drop) for low to mid-range machines, and I got to wondering what the stock was looking like.

    Low and behold there she sat at ~$2.40 a share. I had read in many boards that the disappointing bulldozer chip had largely lead a hit on the chipmaker as being junk, and that despite the upgraded piledriver chip, AMD was still suffering. To anyone who was paying attention, their new steamroller was their last shot at salvation. During that time, no one thought that the Richland chips being released would be as well received as they had been; nor did anyone suspect that AMD would be picking up the PS4, XBOX 1 etc.

    Still at around 2.40 a share I was a little surprised. Here was Intel's last competitor in the PC world, and she was flailing. Sure the mid to high end Intel chips beat the pants off of most AMD chips at the time (save for the APU chips such as the Trinity) - but without AMD, who would keep Intel honest? If AMD chips were not available at a small price for good performance, would Intel have lower price chips en mass that performed as well as the AMD ones did? I doubt it.

    Long story short the watch begun. Q1 earnings came and I watched the stock start to fly. A little later they announced XBOX1 and PS4 would be using their graphics and processors, and I noticed that the Motley Fool, Barrons, and a few other 'well respected firms' were calling it 'a possibility'. Almost a whole week went by before they acknowledged that it was indeed set in stone - in which time they continued their disparaging comments on how this would not help AMD significantly. All they focused on was the declining PC market and how nothing would save AMD from that.

    I am not going to regurgitate the numerous pages of information on either side of this as it has been already beaten like the proverbial dead horse. What I will do however is point out the full extent of just how unethical these firms are making their claims - and how such high end firms are using publicly announced ignorance in kicking AMD into the dirt.

    For an example, the last earning call for Q2 went rather well. Before the call I honestly thought that the stock at 4.40 was currently over-priced - but around 4 was far more reasonable with current numbers. I was shocked to find that the new APU's were leading the charge in sales in regards to laptops, notebooks, and PC's. On the flip side, it makes sense as rather than buying a discreet graphics card and CPU, you can just get a single chip - saving quite a bit. Sure your performance would never be mind-blowing, but for low to mid-range machines, it is just what the doctor ordered. When global economies (including the US) are rather dismal, people will be looking at the best bang for their buck - not an over achiever.

    Then the downgrades started - downgrades from firms that obviously did not listen to the whole call (couch cough Morgan Stanly) - and made some remarks that indicate that they either did not research AMD properly - or were deliberately misstating fact. The most disturbing part of this to me is the fact that the market reacted to these downgrades and reasons with such zeal that you would think the NASDAQ was having a blue-light sale, and AMD was at the top of the list. Only few and far between were the commenter's who saw this for what it was - a good old fashioned beat down.

    Yes AMD is risky, and is not out of the water so to speak. In addition their competition is extremely good at what they do and are not to be taken lightly. Yet all this was known long before their call ever took place. To make matters worse, the financial 'experts' in multiple articles in multiple venues were all spewing the same nonsense - in complete disregard to the details.

    Take the 'disappointing graphics sales'. Do these 'experts' in technology NOT know what integrated graphics are? Do they not understand that the APU's are often used with a motherboard alone to provide the graphics at a cheap price - hence the upswing in APU sales? Do they not understand that discreet graphics cards will run a little more, and that many of the mobile/laptop would opt for an APU as oppose to a regular machine that needs a graphics card that will add to both price and power consumption? No - they do not understand this simple thing 1 iota. And if they were referencing desktops, all they need to do is hop on any NVDA or ATI forum where they would find the two are held in equal favor for the desktop market. In short, stating 'poor graphics income' as a reason to downgrade is ignorant at best.

    If they were going by what AMD had stated multiple times over (including their Q2 report and conference call), then they would know that the lion's share of their 'Graphics and Visual Solutions' revenue was including custom chips, and the revenue from the XBOX and PS4 sales - which the company stated many times would not be shown until Q3 when the ramp up started. So it wasn't because the AMD presenters were asked an unexpected question as stated by many including several in the Motley Fool, but because the question was already answered (in a far more positive light). The presenters were not remaining silent because they were ambushed, but because they were wondering if any of those asking the questions if they had listened to a word they said up to that point - much less understood what a computer chip is.

    Another common hit given is 'their gross margin was actual decreasing since last quarter' - which is even less than last year. For an average investor to make that mistake is forgivable - if you didn't listen carefully to the conference call, read the earnings report yourself, or listen to the news, you wouldn't know any better. However for a technical analyst to a big name firm like the ones making these statements, this is unforgivable - especially due to the fact that they are more than aware of the power they hold on the street.

    Yes, the gross margin was officially set at 40% - indeed 1% less than the previous quarter. But if read the rest of it "Gross margin was 40%, a decrease of one percentage point sequentially and includes an $11 million benefit from the sale of certain products previously reserved in Q3 2012. You may recall that Q1 2013 gross margin of 41% included a similar benefit of $20 million. Excluding these benefits, gross margin was flat at 39% for both Q2 and Q1 2013." - Devinder Kumar. This simply means that technically, 40% is correct, but given all factors, the GM was 39% for both Q1 and Q2.

    In short, AMD's biggest obstacle right now is not Intel - nor is faith in AMD getting lost due to products or statements. It is getting hammered because big names on the Street can say whatever they want with no negative repercussions, and have an army of blind followers swallowing whatever garbage these government bailed out hogs can feed them. Truth be told though - I am not going to sweat it past this. If these firms do buy below 3.70 a share (or upgrade it to a buy while it is in that range), then they will have to admit to manipulating the market to lower the price. If they do not buy, then their investors will be able to see them for the jokers they are. The only sad part is that neither outcome provides the ridicule these guys truly deserve. If honesty was what they were going for, then they should have cited a real reason to downgrade in their opinion rather than run of the mill, played out manipulation tactics.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Jul 23 10:18 PM | Link | 8 Comments
Full index of posts »
Latest Followers

StockTalks

  • AMD down $3.76* 0.42 negative 10.05% ?????? On good earning???
    Jan 21, 2014
  • $AMD - registered for APU365 - only a few hours away!
    Nov 11, 2013
  • Saw a multitude of A10 and A8 notebooks and desktops at SAMs. Progress.
    Oct 30, 2013
More »

Latest Comments


Most Commented
Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.