ABOUT
FROM INSIDE SILICON VALLEY: Sorting the truth or likely truth from the noise is a key attribute of the successful investor. My commentary is a distillation of some of this effort relative to particular stocks and investment areas. My publishing at this point in time is limited to the blogsphere, Stocktwits as a Tweeter (@RobertinGatos), and Seeking Alpha posts as both an author (one article and trying to find time for more) and frequent commentator. I have no doubt that this truth seeking effort has been a great aid in my own efforts to be a successful high tech stock investor, which now goes back over 30 years.
Professionally, I was an Engineering Manager in two pioneering Silicon Valley high technology ...More
companies, Intel and Fairchild Semiconductor. Some will recall that Fairchild was formed by the group that William Shockley, co-inventor of the transistor of Bell Labs fame. had brought together at Shockley Labs to commercialize this device. I joined Fairchild Semiconductor R&D Labs in Palo Alto in 1973. It was at the time affectionately called "Fairchild Tech" due to its propensity to create spinoffs including National Semiconductor, AMD and Intel.
I joined Intel in in 1977 as Manager of their Analytical Lab start up and retired from Intel's senior management ranks in 1998. I joined a startup called Metara as a BOD member and ultimately as VP and Chief Technology Officer. I facilitated the generation of 17 automated mass spectrometry patents and became an expert on analytical technology patents as a result. I retired a second time in 2006 due to the fact that Metara ran out of capital before the first product was fully debugged. Venture caps can be fickle people.
Through out this time, I was surrounded by high tech business activity including management and ultimately startup financing. I stayed familiar with the high tech business press throughout this time and attended relevant Silicon Valley events including many Valley technology investment conferences and shareholder meetings beginning well before the Santa Clara Valley area was called Silicon Valley.
My start as a high tech investor occurred in 1981 when my first Intel stock options became exercisable. I used margin to exercise, buy and hold my Intel stock while I added margin to buy companies like MSFT, CSCO, ORCL, JDSU, SUNW and QCOM from the 80's forward. Needless to say the returns were outstanding. I had the luck of being exposed to long term LEAP call investing by a follow Intel manager and used this technique as additional leverage for most of my tech investments since the very beginning.
I used to love to bet against Merrill Lynch'sTom Kurlak who was known as THE Intel analyst of the time. He would make a negative call on Intel that I knew was way off the mark and use this opportunity for entry into my next set of Intel LEAP calls. That taught me to take advantage of Wall Street whenever possible rather than be their victim.
My original investment specialty was tech stocks however I have expanded my expertise in many key sectors. I follow high tech trends and business activity on a daily basis. I have added Financials to this tracking in particular since the bad behavior of the Investment Banks and now regular Banks (derivatives and lending practices) has led to multiple ugly stock market crashes. Notable examples include the crash of 2008 and the 2000 dot.com bubble with more yet to come, at least in the absence of better regulation.
I am a firm believer in understanding the business model, the business fundamentals and competitive environment for any company that I invest in. I look for competent management and high performance financials that demonstrate a strong possibility of on-going earnings and revenue growth. I read CEO pronouncements with my competence and BS detector on high (for example Ballmer pegs both needles - I'll let you guess which end of the scales). Drilling into a company’s financial fundamentals is a downstream step. Excessive debt is a red flag even if it is for so called good reason -- it limits company margins and business options, and can be representative a poofly performing business segment a company is in. I avoid those kinds of businesses in spite of what may be labeled as strong positive cash flow. Debt leads to sluggish earnings growth and limits company flexibility. It can also lead to ugly surprises, stock dilution for example. Technology company stock buybacks leave me cold. If they cannot make more money by growing their own business with the money, they will flatline or worse.
When the opportunity permits, I try to be ready to buy good companies that I believe have been beaten up inappropriately or are under appreciated (the Tom Kurlak example). I also try to buy companies that I know and understand inside and out or work on getting to there if I invest. Fewer companies, <10. is better if you are to do the disciplined due diligence that is required. To confess I have never gotten to that few but hat is the goal for my high tech account in the next year.
Apple is the best under appreciated company I have ever invested in, more recently with TTM PE ranges between 15 to 17 max, even dipping below 12 recently. This is while having a revenue and earnings growth rate averaging or exceeding 50% y-y. Apple has been an under appreciated stock since I first invested in 2007. Apple caught my investor instinct when they converted Mac PC's to Intel X86 microprocessors. I also soon noted that Steve Jobs strategies were kicking in full force and that rumors of the iPhone were starting to filter out. For me the rest is good history so far.
I am a frequent user of long term call options called LEAPs for increased leverage -- especially in the case of a beaten down or suppressed stock price. I have developed a disciplined methodology for the use of LEAP call options. This strategy has been quite successful unto itself. It eliminates the need for other complicated and cumbersome short term option and spread strategies that can severely limit payback opportunity. My calculations on a limited set of spread strategies say that my LEAP call strategies, at least for a dependable strong growth stock like Apple. You know the long term company of the growth of the company will bring the stock back in spite of various dips and lengthy doldrums that usually occur several times per year.
I do spend a lot of time understanding company stock direction and taking into account the good market - bad market environments that may be present. The best opportunities occur if the masses are not indeed getting it yet. I am currently long in Apple 2012, 2013 and 2014 LEAP calls for these reasons and have been since midyear 2007. This is when Steve Job's strategies were kicking in big time and when Apple adopted the Intel microprocessor eliminating a major roadblock to growth.
By way of my professional background, I retired from Intel in 1998 with 25 years of great experience to look back on. At Intel, I started their first analytical labs so that they could really see what they were making in the best possible detail and also do local chemical analysis to the nano scale using tools like electron microscoy. I formed what may have then been the industry's first corporate wide analytical lab network. This network became worldwide as the company grew. These analytical and failure analysis labs were responsible for the introduction of new methods to meet the demands of rapidly advancing semiconductor technology while providing routine manufacturing support. We develped the most advanced methods for physical failure analysisincluding the ability to modify the wiring on a microprocessor in the equivalent of an electron microscope so we could do reality testing on circuit modification designed to improve microprocessor performance and reliability. While at Intel, I served as representative to the SEMATECH Analytical Lab Managers Working Group and the SIA Metrology Technical Working Group.
After retirement from 1998 Intel I joined a startup company called Metara Inc and served as an Executive and Board of Directors Member until 2006 Metara introduced and manufactured automated mass spectrometry based metrology instruments for semiconductor process control. Unfortunately they ran out of money before the product was completly debugged. Seeing venture cap operate was an experience unto itself adn taught me lots of lessons that are applicable to investing.
Prior to joining Intel, I was responsible for the Advanced Materials Analysis Lab at Fairchild Semiconductor R&D for five years. Over the years, I have served in various advisory capacities to other startup companies and for to the National Labs including the Advanced Light Source at U. C, Berkeley and NIST. I received a Ph.D. degree in Materials Science from the UCLA School of Engineering in 1981.
