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Diodes Inc. Now A Better Near-Term Bet Than Broadcom

Jun. 13, 2020 6:08 AM ETDiodes Incorporated (DIOD)AVGO8 Comments
Peter F. Way, CFA profile picture
Peter F. Way, CFA


  • Not for a long-term hold; this may be a three-month or less position while DIOD catches up with other semiconductor stocks.
  • DIOD’s odds-on prospect has a history of capital gains in six out of every eight prior forecasts with likely upside-to-downside balances like today, at net CAGRs of +75%.
  • Compared to dozens of other semiconductor stocks (not just AVGO), it’s way ahead on the Reward vs. Risk scale.
  • This is another example of making profit while the rest of the group’s leading stocks are resting. But MMs only were right six of every eight of the past five years' 51 such forecasts, so no guarantees. Just good odds.

Investment Thesis

Active Investing strategy involves anticipating coming prices; Passive Investing strategy (buy&hold) involves celebrating continuance of a hoped-for past-price "trend".

This article takes the self-protecting current hedging actions of Market-Makers (MMs) accomplished in open markets for derivative securities as competitively-vetted forecasts of near-term coming price prospects. When realized, reinvested gains compound into CAGRs far above market averages or other passive strategies.

Historic evidences of outcomes of prior MM forecasts provide the means of evaluating price-loss risk experiences against price-gain achievements in selecting odds-on choices to further the aim of capital-gain wealth-building portfolios.

Diodes Incorporated (NASDAQ:DIOD) appears now to be such a candidate.

Another day's step in the march of technology making humankind's life more desirable. But with the important economic benefit for adroit investors of high RATE of capital gain, using DIOD. Here's how the company is viewed via Yahoo Finance:


"Diodes Incorporated, together with its subsidiaries, designs, manufactures, and supplies application-specific standard products in the discrete, logic, and analog and mixed-signal semiconductor markets in Asia, North America, and Europe. It primarily focuses on low pin count semiconductor devices with one or more active or passive components. The company offers discrete semiconductor products, such as performance Schottky rectifiers and diodes; Zener and performance Zener diodes, including tight tolerance and low operating current type; standard, fast, super-fast, and ultra-fast recovery rectifiers; bridge rectifiers; switching diodes; small signal bipolar and pre-biased transistors; MOSFETs; thyristor surge protection devices; and transient voltage suppressors. It also provides analog products comprising power management devices consisting of AC-DC and DC-DC converters, USB power switches, and low dropout and linear voltage regulators; linear devices, such as operational amplifiers and comparators, current monitors, voltage references, and reset generators; LED lighting drivers; audio amplifiers; and sensor products, including hall-effect sensors and motor drivers. In addition, the company offers standard logic products comprising low-voltage complementary metal-oxide-semiconductor (CMOS) and high-speed CMOS devices; ultra-low power CMOS logic products and analog switches; multichip products and co-packaged discrete, analog, and mixed-signal silicon in miniature packages; silicon and silicon epitaxial wafers; and crystals and oscillators. It sells its products to

This article was written by

Peter F. Way, CFA profile picture
Peter Way Associates provides daily updated, near-term (3-month) price range forecasts for over 2,500 widely-held and actively-traded stocks, ETFs and market Indexes. Comprehensive results are available on the SA blog of my name.__These forecasts are derived from the way market professionals protect their own capital placed at risk while helping big-money portfolio managers adjust their holdings in multi-million-dollar "block" transactions.__ They cannot be found elsewhere.__Having these price-change prospects available on a continuous basis encourages individual investors to actively and economically build up the values of their own smaller portfolios. PWA only provides information for individual investors; it no longer manages investments for others.__Rates of portfolio capital growth being achieved by subscribers are at MULTIPLES of the growth in market averages, due to the efficient use of holding period time and the compounding of gains a number of times each year.__Risks of capital loss are protected against by insightful selection guidance and holding-period-limit disciplines. The advantages of good selection and careful timing amply cover a much smaller portion of unavoidable losses.__These Market-maker forecasts have several decades of demonstrated productivity. Earlier in the 20th century they were used by large institutional portfolios, and now in the 21st century they are available only to individual investor wealth-building portfolios. Thousands of day-by-day identifications of specific securities having consistent, odds-on profitable results rule out any likelihood of their exceptional outcomes being due to chance. Peter F. Way is a veteran Chartered Financial Analyst, having taken and passed the CFA Institute’s required 3 examinations in the first years they were given, 50+ years ago. Armed with BS in Economics from the Wharton School and an MBA degree from Harvard Business School, he has managed staffs of dozens of Investment Researchers and Quantitative Analysts for the nation’s largest bank, arbitraged index options for NYSE Specialists, and managed portfolios of hundred-million-dollar equity investments for Fortune 100 corporate pension funds and non-profit endowments. He has been elected President of professional Investment Analyst Societies in San Diego and New York City and has served on the editorial boards of the Financial Analysts Journal and the CFA Digest.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in DIOD over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: Peter Way and generations of the Way Family are long-term providers of perspective information, earlier helping professional investors and now individual investors, discriminate between wealth-building opportunities in individual stocks and ETFs. We do not manage money for others outside of the family but do provide pro bono consulting for a limited number of not-for-profit organizations. We firmly believe investors need to maintain skin in their game by actively initiating commitment choices of capital and time investments in their personal portfolios. So, our information presents for D-I-Y investor guidance what the arguably best-informed professional investors are thinking. Their insights, revealed through their own self-protective hedging actions, tell what they believe is most likely to happen to the prices of specific issues in coming weeks and months. Evidences of how such prior forecasts have worked out are routinely provided in the SA blog of my name

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (8)

I don't see how a company where 60% of the revenue has come from consumer electronics, industrial, and automotive markets could be a top stock to own during a pandemic. Those sectors are likely to be under pressure for quite some time.
Peter F. Way, CFA profile picture

We might think so, and it would lead us to reject putting risk capital into such a stock for a questionable payoff in "quite some time".

But we are not privy directly to information which makes the market-makers concerned about being short DIOD in order to fill the institution's big block trade order, and facing an upside price loss of as much as 18%. And the institution must believe that the stock will do that well in order to swallow the increased trade-spread cost of the hedge deal it took to make the MM willing to take a temporary "principal" position in the trade.

Differences of knowledge like these are what make markets worthwhile and functional. But it has led the MM community to winning 3 out of every 4 bets like this in DIOD, and seeing the stock rise by +11% in the next 9 weeks, at a CAGR of +75%. That is the power of a near-term, temporary position rather than one which looks for payoff in "quite some time."

With strong, functional markets there is room for many investors with different preferences and holding period time horizons.

Best wishes for your continued investing satisfactions.

Thanks for the informative write-up, Mr. Way. But I think I'll just continue with my longterm hold of AVGO (with its 4+% yield and strong dividend growth).

Retired dividend-growth investor
Peter F. Way, CFA profile picture

Good, strategy should fit the investor's needs and preferences. That's what keeps markets liquid and balanced.

Best wishes for your continued investing progress.

Varan profile picture
A ranking based on the ratio of reward to risk might lead to a useful comparison especially for stocks other than those close to having the lowest risk like DIOD or OSIS.
Peter F. Way, CFA profile picture

I agree, and thanks for your comment.

We provide other, broader rankings of our population of over 2800 equities, as noted in the lower blue-rows of Figure 2. The lowest row indicates that other opportunities, outside of the Semiconductor industry, at the moment provide better capital gain opportunities. They may be found at a different website.

Here we are attempting to point out opportunity which appears to exist within the diversification of businesses which might currently exist within an investor's portfolio. Ones which could be adjusted without disrupting the intended diversity.

We are proponents of Active Investment strategy, which you suggest. It is our decades-long experience that insightful timely selections of equities which offer advantageous capital gain prospects regularly (but not perfectly) provide far greater wealth-building results than do Passive Investing strategies. Regardless of claims by that clan to the contrary.

Cheers for your posture! We hope to be of assistance in its furtherance.

Best wishes for your continued investing progress.

Hi Peter, your last sentence, 2nd paragraph - "They may be found at a different website". Where is that please?
Peter F. Way, CFA profile picture

Please visit blockdesk.com

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