E Bottom Fishing For Value: Week Ended April 29

Bottom Fishing for Value: Week Ended April 29 


The call to buy Advanced Micro Devices (AMD) earned 23.4% in ROI, even after its meteoric rise post-earnings. This was not enough to hold the positive weekly return for the micro cap value stock ideas. Still, the long call on Terraform (TERP) following SunEdison’s bankruptcy announcement and getting bearish on Marketo (MKTO) and Immersion (IMMR) will help the strategy’s long-term return.

In the bottom fishing for value strategy, there were more bearish (sell) ideas than buying ones. Technology stocks are due for profit-taking. Companies like Microsoft (MSFT) sport a P/E of closer to 40x, compared to Apple (AAPL) whose price-multiples compression worsened after the latter reported a revenue drop. Cray (CRAY) is also too expensive.

Speaking of Apple, value investors should be all over this stock. The growth phase is likely over for a while. The company’s goal now is returning money to investors through share buybacks and dividends. In the mid-term, Apple is more likely to visit the $80’s than to recover back above $100. Tech investors will shift their focus in growth stocks supplying to virtual reality. Conversely, companies that supply to Apple might fall, too. This is short-sighted. The smart phone market stopped growing, but there is value. As that story unfolds, the strategy of finding value will thrive.

Disclosure: None.

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