*Sigh*

Well, that went well.

It's been another rough two weeks for the portfolio (which, as the caveats clearly explain, is purely virtual).  Synacor (SYNC) and Entropic (ENTR) both have both seen a significant retreat after their climb through November, now down to prices of $2.52 and $4.55 a share respectively.  But once again, the bane of the portfolio is ornery little Peregrine Semiconductors (PSMI).  After rocketing to the low 9s in late November, it has - since my last post - re-tanked down to the floor-hugging low of $7.92 a share.  For a while, I had no idea why this would happen.  I looked carefully, but could find no news about Peregrine Semiconductor, and certainly nothing that would warrant a nosedive. Then, it came to me, a dark, unwelcome revelation: Apple.

The tech world's resident hardware superpower casts a long shadow, and the news of Apple can have weirdly drastic effect on any number of companies, both logical and illogical.  Peregrine is one such company.  Because it's primary business model is antenna switch models for smartphones, it is viewed (semifairly) by most investors as a high-end smartphone component supplier and viewed (unfairly) by some investors as an Apple supplier.  I have mentioned in an earlier post that characterizing Peregrine as an Apple supplier is a massive oversimplification, but that doesn't stop investors from making that mistake.  As a result, a brief glance at the trajectory of AAPL and PSMI over the last month shows a striking similarity, with the variations made far more drastic in Peregrine's stock price due to the much lower level of investor scrutiny.  (In an absence of information, a misconception or transient impression can propagate much more quickly and have much deeper effects.)

So why is AAPL going up and down?  The main explanation appears to be China Mobile: for quite some time, Apple has been trying to ink a deal to sell the iPhone on China Mobile, the world's largest mobile phone operator, with 740 million customers.  In late November, the two companies seemed on the verge of a deal, and Apple's stock jumped 7-8% in a week.  Around the same time, Peregrine saw its stock jump over 12%.  Then, rumors began to spread that the deal was going to fall through, and AAPL began to decline; the decline was relatively mild, only 3-4%, but the corresponding fall for Peregrine was much steeper, coming down to below $8 a share.

Of course, all this might just be a neat post-hoc explanation; but we have a convenient way to test our hypothesis.  Earlier today (December 22), Apple and China Mobile announced that they had in fact reached a deal, and the iPhone will be sold on China Mobile starting January 17.  This is likely to push Apple's stock a little higher, and, if our theory is correct, it should send Peregrine quite a bit higher soon.  We'll see how things go in the coming week.