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Vince Martin's  Instablog

Vince Martin
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I've been contributing to SA since 2011, with a break to join the PRO editorial team from 2013-2015. I got my Series 7 and 63 back in 2000, and watched the dot-com bubble peak and then burst in real time at a small, tech-focused retail brokerage in NYC.
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  • Keep Selling Puts on ASYS
    A while back I wrote a quick piece on ASYS, and the returns from selling cash-secured puts on the solar semiconductor maker. The stock has declined (though not enough to make that trade lose money, as yet), and the opportunities are better.The November 15 is bid at $1 -- 7.1% return (over 20% annualized), with break-even at $14. That's a $7 enterprise value for a company that's earned $2.28 over the past twelve months and set new revenue records the last five quarters. I understand there are worries in the semiconductor sector broadly, and some pricing issues within the solar portion of the sector, but a 3:1 EV-E as your downside? Worth a look.
    Tags: ASYS
    Jul 19 11:53 PM | Link | Comment!
  • Sell Cash-Secured Puts to Take Advantage of ASYS Downturn
    Amtech Systems (NASDAQ:ASYS) is an Arizona-based company that provides manufacturing equipment to the solar and semiconductor industry. While the stock has struggled in 2011 – it is 43% off highs made in mid-February – it has still tripled from its bear market lows in late 2009.

    From a value investor standpoint, ASYS seems almost too good to be true. The company has nearly $7/share in cash net of liabilities, while trading at a ttm P/E of 8.1 and a forward P/E of 7.3. (Enterprise figures are even better – an enterprise value of just 5.2x earnings.) All this with forecast revenue for FY11 (from the company's guidance) of $240 million – 1.3x the company's market cap and better than twice the company's enterprise value of a little more than $100 million. The company expects to double revenue in FY11 and with exposure to the growing solar industry worldwide, ASYS would seem to be positioned to soar.

    While there are some concerns – the company filed a $60MM shelf offering in February and has been a target of short sellers, with a 14% short float – ASYS looks like an excellent company, and the recent sell-off provides an attractive entry point. We will save the more detailed analysis of the bull case for later; in the meantime, the floor put in by ASYS' strong cash position and detailed growth creates an excellent short-term opportunity to sell August 17.5 puts, a strike price just pennies below Friday's close at 17.56.

    With 61 days to expiration, the selling of a cash-secured put at the bid of 1.60 offers a 9.1% return on our risk capital, a 54.4% annualized return.To earn our 9+%, we need the stock to avoid a +++% loss. Our break-even is 15.90, a 9.4% drop from Friday's close (and below the base of support consolidated in late 2010 at around $16-17/share).

    With the possibility of a short squeeze should support finally be reached, a simple purchase obviously offers more upside and the ability to fully capture any bounce-back in the stock. However, the general downward drift in the stock, and the headwinds facing the broader market in general and semiconductor sector in particular, point to using a cash-secured put (equivalent to a covered call) to provide some downside protection. As mentioned, our potential profit is a handsome 54% annualized rate, while our downside is owning ASYS at a net of 15.90, just over half of its 52-week high. Owning ASYS at 15.90, with $7/share in cash, growing revenues, and solid earnings, is a pretty good downside to have.

     

     

     

     

     

     

     

    Jun 19 1:11 PM | Link | Comment!
  • TSRA Consolidates at 52-Week Low

    Tessera Technologies (NASDAQ:TSRA) licenses patents for technology related to the semiconductor industry. The company is a value investor's dream, with $9.65 in cash per share, 61% of the company's closing price of 15.70 (as of June 17th). With an enterprise value just north of $300 million, Tessera:

    • has delivered free cash flow totaling $280 million in the last four years
    • has a trailing EV-earnings ratio of 5.2
    • has a forward EV-earnings ratio of 4.6, based on analyst estimates of $1.32/share for FY11 (numbers from Reuters Finance)

    TSRA is currently trading near its 52-week low of 14.96, though it is consolidating a base of support also reached in mid-March 2011 and early September 2010. While revenues may be impacted by a downturn in the semiconductor industry, as licensing deals provide lower earnings, TSRA's lack of facilities (capex was only $30MM each of the last two years) and strong cash position provide plenty of cushion. And, as noted a few weeks back by Seeking Alpha contributor Frank Voisin, Tessera has a strong history of winning litigation. The company currently has suits outstanding against Sony, Motorola, AMD, and other manufacturers, and a win – or a favorable settlement – in any of these cases could provide a boost to the stock.

    With support consolidating, and a strong floor with the 9.65 in cash, this seems an attractive spot to purchase TSRA stock. With earnings coming in late June, a short-term call could be used to try and capture a bounce off the lows. The July 16 call is available for an ask of .60; this trade is profitable should TSRA bounce 5.7% from Friday's close to reach $16.60 or higher. While the naked call purchase obviously has a good deal of risk, the combination of an earnings beat and the bounce off of long-term support makes the July 16 an interesting gamble.

    On the opposite side of the risk spectrum, a cash-secured put can offer a safer trade with less risk to equity. The September 16 put is bid at 1.40; this requires just a 2% gain in a touch under 3 months to receive our maximum gain of 8.9%, or 36.5% at an annualized rate. The break-even point on this trade is 14.60, a further 7% drop from the stock's already depressed price. At any point below that, we own TSRA at 14.60, or under $5/share net of cash, a solid price for a company projected to earn well over $2/share combined in 2011 and 2012. Between TSRA's solid numbers, its stable of high-tech patents, and the cushion built-in by nearly $500 million in cash and investments, this looks like an attractive trade for the short- and long-term.

    Jun 19 1:04 PM | Link | Comment!
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