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Tom Armistead
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I'm a well-informed retail investor and post on SA in order to expose my thought process to critical examination and comment from readers. It makes me a better investor. I'm particularly proud of bullish macro articles posted in 2009 and later, in which I presented ideas that encouraged me to... More
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  • Hutchinson Technology says they're going to make it 3 comments
    Aug 6, 2009 11:38 AM | about stocks: HTCH, WDC, STX
    I wrote Huthchinson Technology (NASDAQ:HTCH) up favorably http://seekingalpha.com/article/107510-hutchinson-technology-20-book-value-2-share-price at 2.05.  The stock got up as high as 4.15 today and I am claiming a doubler. 

    Hutchinson makes head suspensions for disk drives, customers include Western Digital (NASDAQ:WDC) and Seaqate (NASDAQ:STX), although Seagate will be dropping them.  As the economy crashed taking tech with it the company got into a struggle for survival, at least in the sense of continuing as a meaningful bit player in the disk maker category. 

    I thought it was a good play based on tangible book value of over 20 per share.  Following operating losses and writeoffs that number is more like 12 per share.  That is a problem that I have encountered frequently on these book value ploys, assets can dissipate rapidly in the face of losses. 

    As of their last conference call, available here on S-A, the company says they are resuming their plans to open an assembly operation in Thailand at a cost of 10 to 15 million, because they are now confident of their financial situation.  I take this as a statement that management believes they are going to make it, otherwise why waste money on capex.  

    The company has about 5 more in cash per share than is needed for normal operations.  If the business starts operating viably I think the shares are worth about 15.  Western Digital according to their 10-K beleives in vertical integration.  They bought Komag when that company got into trouble.  So there is a chance WDC might be interested in acquiring HTCH. 

    Taking all of this together I am going to hold HTCH and look for further gains.

    Disclosure: long HTCH and WDC, short STX
    Stocks: HTCH, WDC, STX
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Comments (3)
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  • FloridaJo
    , contributor
    Comments (16) | Send Message
     
    I'd be reluctant to own anything related to hard drives for 3 reasons:
    1) The technology is old, has too many moving parts for modern devices and will soon go the way of VHS tapes.
    2) 3D laser static hard drives have been in development for quite a while and I believe they will begin to appear in the market in the not too distant future as well as higher density flash drives.
    3) With the economy being bad for some time to come, I foresee these newer technologies appearing about the same time as the economy comes back to life sapping any improved demand for legacy hard drives with it.
    8 Aug 2009, 10:04 AM Reply Like
  • Tom Armistead
    , contributor
    Comments (5619) | Send Message
     
    Author’s reply » 1) I would have said it will go the way of the record made of wax, the question is when
    2) good to know, I was aware of flash being used for drives but not of the 3D static laser...
    3) I looked at the flash and I believe the hard disk is more cost effective, flash is likely to be used in hybrid arrangements, for a cache.

     

    I had nice profits on STX and WDE - I am now out of WDC and short STX...but HTCH has been making a run and I think it has further to go based on the idea the hard drive technology will continue in use for a long time due to cost considerations.

     

    On Aug 08 10:04 AM FloridaJo wrote:

     

    > I'd be reluctant to own anything related to hard drives for 3 reasons:
    >
    > 1) The technology is old, has too many moving parts for modern devices
    > and will soon go the way of VHS tapes.
    > 2) 3D laser static hard drives have been in development for quite
    > a while and I believe they will begin to appear in the market in
    > the not too distant future as well as higher density flash drives.
    >
    > 3) With the economy being bad for some time to come, I foresee these
    > newer technologies appearing about the same time as the economy comes
    > back to life sapping any improved demand for legacy hard drives with
    > it.
    8 Aug 2009, 11:50 AM Reply Like
  • Tom Armistead
    , contributor
    Comments (5619) | Send Message
     
    Author’s reply » Started selling off HTCH at 5.00, then 5.42, 5.59 and today 6.34. Tangible book value is now 11.99, using a 12 target I will continue to scale out between today's price and 12.00.
    28 Aug 2009, 09:55 AM Reply Like
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