To the Moon and Back with Radyne (RADN)

| About: Radyne Corp. (RADN)

This is the fourth of my promised four sells, though I have a couple more that I may take off the table or reduce my stake in in order to make some new purchases.

I sold Radyne Corporation (RADN) last Thursday at $15.78, locking in a roughly 100% gain in about 18 months (bought last January at $7.86). This is a bit of a turnaround for me, since I last wrote in the fall, when the shares were bumping up after great earnings and hitting $13 or so. Back then I was hoping to hold and ignore this very quick grower.

Things turned out a little differently. So why did I sell? Well, in looking through my sale candidates, this stock was one of the very good performers whose future growth did not seem like a sure thing. RADN had a huge bump up over the past year or so with the acquisition of a like-sized competitor in their space (satellite modems, etc.), and I think that initial growth was a big part of the reason for their extremely rapid ascent. Were it not for the Xicom acquisition, I expect I'd still be holding this company and expecting 20%+ growth annually.

But after 100% growth in one year, from a company that has gone from totally undiscovered and dirt cheap to a level where it's certainly priced for some significant growth expectations, I feel like this is a good time to take it off the table.

I don't expect dramatic growth from RADN in the near future, though it's possible that I'm wrong and I'll have to watch from the sidelines as it doubles again. In this case, though, I wouldn't buy it here at a 25 trailing PE. I don't have a strong enough feeling about their positioning in this very active and competitive business to assume that they'll be able to grow quickly enough to justify that pricing. And the forward PE of 20 is just about a wild guess, given the extremely limited analyst coverage.

In the end, though, I did plenty of math and reviewed the company's financials carefully, it probably comes down to the fact that I wanted to take some profits to go along with the two losing positions I sold earlier (SNDA and TASR).

Radyne was the fast grower that I was least sure of going forward, both because of the company and the industry/sector, so it gets thrown off the boat. The industry is one that's not terribly transparent to me. Satellite communications, especially for HDTV and military uses, the areas in which RADN works, seem to be a growing industry. However, I don't have a real sense of the market size. We're dealing with the ground-based modems, amplifiers, and uplink/downlink equipment that are used by TV producers to transmit sports events, for example, and I don't have a good handle on the upgrade cycle or the additional growth in this business once the basic infrastructure is built out and everyone has a basic level of equipment Which is what I sense to be the situation today.

I think that we individual investors often have trouble in reassessing companies when they may be in periods of transition . Radyne seems to me like it has significantly increased its market cap and capabilities, brought all those new sales under the tent, but perhaps might have trouble continuing to grow the market cap from this new larger base given their significant PE expansion -- from well under 15 to 20+.

Whether or not my instincts on this are to be trusted is a matter for another day -- this remains a teensy company that could easily move up or down in completely unpredictable ways. I'll try to remember to look back at this wave of selling in a few months and see what happened to my orphaned companies.

Until then, it's time to continue looking for bargains among the rubble of last week's trading -- I was happy to pick up Chico's and Click Commerce shares recently, and I'm carefully considering which of my other holdings might be a good place for a new injection of cash.

RADN 1 y-r chart:

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