Robert Weinstein

Why I Love Synaptics at This Price

Yes, HURN is Huron Consulting and the change of company name is a result of editorial changes from my original submission by SeekingAlpha staff.

HURN was actually brought to my attention by another trader of Friday afternoon asking my thoughts on it. My advise at the time was to take a pass on it (it was trading about 19.10 in AH trading at the time I looked at it)

I would agree that it was oversold IF (and its a big if) more shoes don't fall. It has been my experience when seeing this kind of fallout that more bad news often happens which knocks the wind right out of any chance of recovery.

I also expect that lawsuits will keep executives very busy in the next year or so as well as add a legal costs to the bottom line for at least the next year regardless if they don't have more bad news. Not to mention payments for possible settlements. I would not be surprised to hear about a press release saying that money is being set aside to pay for a settlement.

That adds up to a stock that I do not find the risk vs reward ratio to be good enough for me to invest it at this time. I do think it will be interesting to follow it and see what happens.

Best to you

Synaptics F4Q09 Earnings Transcript

Synaptics (SYNA) went on big time sale Friday.

Wow, SYNA was just hammered Friday in ways that you don’t often see in a stock. The only stock that I know of that had what I consider to be bigger action was HURN and HURN is restating earnings and booted some of the top brass (without pay packages).

What did SYNA do that was so bad as to cause the stock to fall more than 30% in one single day?? Did they miss earnings? (no beat earnings) Did revenue fall (nope) How about some accounting problems (nope), ok I know what it must be. Perhaps they are having trouble getting financing to keep cash flow from drying up? Not at all, they actually retired much of their debt in the last year and have plenty of cash (interest earned relatively went down with interest rates but went UP as a result of more cash on the books).
The crime that SYNA did was they guided lower than expected in terms of revenue. They also committed what the market on Friday called a felony by stating that earnings may be flat due to headwinds in the overall economy. This is a company that is adding staff to grow the R&D and is still able to say that earnings will not be going down.

These are crimes that I feel the jury of the marketplace will soon forgive. SYNA is a company that has growing sales and a non sky high PE that is not only very reasonable to me but cheap for a growing tech company in great financial shape.

The CEO is stepping down as was announced during the conference call and while that never gives me a warm feeling inside its an insider that is taking the helm and appears that it should be a smooth and planned change in leadership.

SYNA generates a lot of income from the touch screens that are on mobile devises including phones and that is what I consider a very good market to be in right now. SYNA makes touch screens for laptop computers as well but at this very moment in time is not the main driver of profits. I for one happen to think that touch screens for laptops is going to continue to become more and more prevalent as prices come down and awareness of the usefulness of them becomes more common.

Those that follow me know me as a “short” and its well earned. I short more than 95% of my trades and when SYNA first went on my radar that’s what I had in mind to do here. As I started looking at it more and more I realized that for me it would be too risky to short this stock. The selling on Friday appeared to me to be more panic and less about the value of the company being less. Basically in a nutshell this stock was on sale because people where selling for the reason that they were scared that the price would keep going down. This of course turns into a snowball effect and can get crazy at times as it did with SYNA on Friday.

While it doesn’t “feel” natural to go against the crowd that’s were the biggest gains can be had. The “trick” is to be selective and not be in a hurry to get in as the market can go much further and stay there for longer than most people understand. I feel that SYNA did go much further than is warranted and that value investors will start to see a bargain here.

The other part of SYNA and its a very important part in getting me to invest in it is that the short interest on this stock is nothing less than HUGE. With over 40% short interest by the latest numbers this stock is already shorted heavily by my standards. When stocks have this large of a short interest they have the ability to shoot off like bottle rockets when buying does come in. As value investors pick up shares on the cheap sending prices higher the shorts start to cover knowing that the first ones to do so are the ones that get to buy back to cover cheap. This buying causes the prices to move higher which brings in the short term trend followers (traders) which causes more shorts to cover. Rinse and repeat this process and a stock that is down 30% one day can move higher 20% the very next day as well as move higher over time beyond the price of the day before the fall.

I of course do not predict the future just the odds. I feel that the odds are that unless something negative happens that the price of SYNA is currently on sale and that this sale will be ending soon.

Earnings Preview: Synaptics

Wow Did SYNA get crushed on Friday. If you own the stock I am not telling you something you dont already know but as a trader (and not yet trading SYNA) I thought it was pretty interesting. It fell off the bridge like they were stinking up the joint. The real question with the sell off is that they are NOT stinking up the place and in fact doing well. The market and shareholders totally fixated on guidance being lower than expected and someone thought it was a good idea to hit the panic button.

I bought SYNA into the close and may buy more into dips next week as I think when the panic fades and people see the value in the stock at "sales prices" the price will move higher