Well it's been a few months since I've made any moves so it seems like this is a good time to provide an update on the three stocks that currently make up the portfolio.
Synacor Inc. (SYNC)
As you may (but probably do not) remember, Synacor was the first stock I purchased for this little investing experiment, back in early June. A full description of the trade and my thoughts behind it can be found here. At the time, I bought 565 shares of the stock at $3.52 a share, creating a position of just under $2000. A month and a half later, the stock had dropped to $3.00 a share, and as a way of backing my original investment thesis about the company, I doubled down and bought 330 more shares, putting my position at just under $2700. Unfortunately, despite my obvious investing bravery, the trade continues to a be considerable loss.
Synacor is currently hovering around $2.70 a share, where it has been since October and early November, during which it dipped even further, dropping as low as $2.25 a share. I clearly still believe that Synacor is undervalued, and I'm not entirely alone in that opinion (see here), but I can't deny that any potential they may have is coming into view slowly at best. Given how they've performed in the last year, and given the bizarre roller coaster ride their stock has taken in the last 18 months, I could hardly blame an investor for taking a pass. Still, part of the premise of value investing (as far as I can tell), is working with the assumption that sooner or later, the true value of a company will be realized in the market, so I think I'll hold on to my position here for now. But I don't expect it to skyrocket anytime soon.
Peregrine Semiconductors Corp (PSMI)
Of the four stocks that have been virtually purchased so far, it is a curious and somewhat unintentional fact that three have been in the semiconductors industry. The first, Volterra Semiconductor Corporation (VLTR), was purchased by Maxim Integrated about a month after I bought. Since I bought the stock at $15.99 a share and the sale price of the company was $23 a share, I was more than happy to sell of my position as soon as the sale was announced. About a month later, I bought stock in two more semiconductor companies, Peregrine Semiconductors (PSMI), and Entropic Communications (ENTR). Let's see how they're doing.
Oh, Peregrine. You seem to be the poster child for the bizarre irrational nature of micro-cap tech stocks. As previously discussed, I originally purchased Peregrine in early September; 270 shares at $11.00 a share. A few weeks later, Peregrine took a dive to just over $9 a share; I felt this dive was unjustified, so I increased my position to 370 shares. Unfortunately, the market did not share my Peregrine optimism, and the stock continued to drop, down to around $8.20 a share in early November. Why? It's not immediately clear. The original dive was largely attributed to a series of downgrades of the stock, which were themselves attributed to the (somewhat erroneous) belief that Peregrine's chips had been left out of the new iPhone designs. (In case you hadn't caught up on PSMI, Peregrine manufactures RF microchips for interpreting complex, noisy or otherwise busy radio signals. Their biggest source of business is cell phone antenna switches, used primarily in 3G and particularly 4G phones.) In fact, Peregrines chips were in the iPhone (thought with a slightly lower dollar content), but though this information has made its way into the world, the stock was largely unwilling to recover. It probably didn't help that the Q3 earnings call predicted a disappointingly low revenue number for Q4 (due to high-end smartphone releases now shifting to Q2 and Q3). So what's the good news?
The good news is that very little has actually changed. Peregrine is still easily the best name in LTE antenna switching and with more phone (particularly mid-range smartphones), making the switch to LTE, there are going to be a lot more customers for their chips. They also have an expected corner on the LTE-Advanced market, which will become more and more relevant in the next few years as LTE-A networks are launched. Finally, their R&D department is clicking on all cylinders to stay ahead of the curve, currently working on a project to streamline and condense the RF front-end so that smartphone manufacturers no longer have to pack 5 or 7 different chips on the logic board to cover multiple networks. Add in the possibility of China Mobile launching a 4G network the new iPhones this month (which, as I said, does have Peregrine's chips in it), their may be a short-term revenue boost along with the numerous long-term upsides. And all of this ignores the numerous other markets that Peregrine has a position in, including military and aerospace systems, high-density sensor networks, and public/carrier-grade WiFi. So, I still feel very good about Peregrine, and it seems that others are starting to agree (possibly thanks in part to this Seeking Alpha column), as PSMI has recovered slightly to just under $9 a share in the last month.
One strange note: literally on the day that the Seeking Alpha column was released, agents from Homeland Security raided the corporate offices of Peregrine Semiconductors in San Diego. Peregrine shortly after announced that it was part of an investigation of "alleged violations of export and temporary import licensing requirements related to certain products sold in the aerospace market". Curiously, though the story was far from impossible to find, and is likely available to most who would consider investing in PSMI, the stock has not seen an effect. I can only assume that investors either already knew about it, or consider it effectively irrelevant. I'll be intrigued to see if that lack of effect continues.
