Download pdf - Technology Opportunitymedia.angelnexus.com/pdf/tao/tao-february-2016-v01.pdfitself as a crucial supply chain partner, the reality is there are other places for OEMs to turn when seeking

February 2016

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In This Month’s Issue:

• Sifting Through the Competition (Why we really like Himax Inc.)

• Buy the Dip! An entry opportunity you don’t want to miss

• The Hills Are Alive... (with the sound of mergers and acquisitions)

• Company News (earnings beats galore)

• Position Updates

What About Kopin?One of the more popular stocks we’ve covered over the last few months is semiconductor firm Himax Technologies, Inc. (NASDAQ: HIMX).

Himax is a small but well-diversified consumer electronics components provider. It makes various internal components for touch panels used in phones and tablets; image sensors for advanced driver assistance systems (ADAS) and cameras; and timing controllers and integrated circuits for image processing.

Himax is also the world leader in microdisplay, or LCOS (liquid crystal on silicon), products based on market share. These LCOS displays are used in a variety of applications, the most notable being miniature embedded projectors and head-mounted displays (such as the Microsoft HoloLens and Google Glass).

As we’ve highlighted before, Himax’s positioning in the LCOS market sets the company up very well for the emerging fields of augmented and virtual reality. The current approach to most head-mounted wearables requires these kinds of miniature near-eye displays to work, which doesn’t leave many places for OEMs like Apple, Google, Microsoft, and Facebook to turn.

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Now, Himax’s ability to gain the favor of the latter three tech giants should certainly tell you something about its capabilities and potential in this space. If the LCOS market takes off, Himax is very likely to be the biggest beneficiary...

However, there is no guarantee. While Himax may be snagging all the attention and establishing itself as a crucial supply chain partner, the reality is there are other places for OEMs to turn when seeking out microdisplays.

This is why we value Himax’s diversification so much. Even if the company’s LCOS segment doesn’t take off, it still has a number of other verticals to fall back on. Himax is the one com-pany on the market that allows us to take a bullish position on emerging technologies like the “iPhone Killer” while still owning a financially secure, dividend-paying tech firm.

All that said, it’s worth addressing one particular LCOS provider that I’ve received a few emails about recently: Kopin Corporation, Inc. (NASDAQ: KOPN).

If you want to take a naked, bullish stance on microdisplays, Kopin Corporation is as close as you’re going to come to a pure play. The company’s growth strategy is based almost entirely on expanding the range of applications for microdisplays — which it has long marketed to the niche technical services industry.

Earlier this year, Kopin unveiled its latest generation of microdisplays aimed at penetrating the emerging AR/VR market. In its press release, the company boasted that its new Vista VR MicroDisplays would “enable designers and engineers to deliver the smallest, lightest and most widely adopted immersive VR systems.”

Now, that might sound all fine and dandy, but until Kopin gains the attention of a major OEM, there’s little reason to take such aspirations with anything but a grain of salt. Not to mention, from a financial standpoint, the company isn’t close to the same level as Himax.

Of the last 16 quarters, for one, Kopin has posted a loss 14 times. Of the last 16 quarters, Himax has posted a profit on every one. Below are a few more key figures to keep in mind:

Himax KopinMarket Cap 1.3B 117.65MPrice/Sales 1.86 3.07Profit Margin 3.64% -34.23%Cash 148.30M 87.34MNet Income 25.19 M -13.03M

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Debt 180.00M 0.00Dividend 3.71% 0.00%

While Kopin may have a fair amount of cash in its coffers relative to its market cap, most of that number came from the recent divestiture of its failing IC (integrated circuits) unit — not recurring revenue. The reality is that Kopin is still bleeding right now, with no bandage in sight.

The best endorsement I can give Kopin as of today is as a speculative stock to add to your watch list. We won’t be recommending the firm in this newsletter unless a major catalyst comes into play, but if you really feel like taking the gamble, I can’t stop you.

Sink Your Teeth Into This

FANG stocks have taken a collective beating since the start of 2016 — even more so than the rest of the market. On average, FANG stocks are down 14.9% year-to-date, compared to a loss of 9.61% for the S&P 500.

FANG, for those who don’t know, stands for Facebook, Amazon, Netflix, and Google. It’s a term for a grouping of Internet powerhouses originally coined by Jim Cramer a few years back.

Cramer has been a consistent proponent of these four stocks, even at their loftiest valuations. I’m prone to agree with Jim’s long-term bullish sentiment on FANG... with the sole exception of Netflix.

Maybe Cramer gave Netflix the benefit of the doubt because the acronym just didn’t sound as good without the “N,” but for the most part I think Cramer is right on the money: These are excellent companies you want to sink your teeth into, even if you missed the boat when they were trading at much smaller valuations.

Of course, the sheer notoriety of FANG makes it pretty much impossible to get in ahead of the curve at this point. As much as I’ve been a fan of Facebook, Amazon, and Google as businesses, I’ve also been reserved in recommending these stocks as a consequence of the recent bull market.

The last time I actively recommended a FANG stock was back in 2013 when Facebook was trading at less than $25.00 a share. Back then, Facebook was coming off what looked like a disastrous IPO. The market had panicked and oversold, which presented a clear buying opportu-nity for buy-and-hold investors.

http://www.wealthdaily.com/articles/is-netflix-nasdaq-nflx-in-trouble-cramer/7402http://www.wealthdaily.com/articles/is-netflix-nasdaq-nflx-in-trouble-cramer/7402

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But as Facebook has ascended to over $100 a share, the chance to buy the stock at a bargain has gradually faded. Do I think the stock will trade at a higher valuation five years from today? Absolutely — but there also have yet to be any major pullbacks in share price to indicate an obvious buying opportunity.

That said, the broader market sell-off that’s occurred so far in 2016 has taken a rather significant chunk out of two other FANG stocks — Netflix and Amazon.

As I mentioned above, I’m not exactly fan of Netflix, regardless of valuation. The company has shed nearly 25% of its market value this year, and frankly I think the sell-off was warranted — bear market or not.

Even after losing a quarter of its valuation, Netflix still sells at a forward earnings ratio of 81.7 with a 50% earnings decline quarter over quarter. If the company had a wider economic moat, the optimism might actually be warranted, but all said and done, the company depends too much on media content to make it worth the risk.

In stark contrast, FANG member Amazon — which has also shed ~25% of its valuation over the last few months — has what just might be the biggest economic moat in the history of business.

There is simply no competing retailer with the logistics, supply chain, or brand recognition as Amazon. This is a company that will be around for decades, and it’s only just begun to scratch the surface of its potential.

Earlier this month it was revealed that Amazon will be breaking into brick and mortar, institut-ing a $5 billion buyback, and cutting its competitors off from warehouse automation company Kiva Systems, which it wholly owns as a subsidiary.

At the same time, Amazon is sitting on a collection of positive macroeconomic factors, includ-ing:

1. Historically low gas prices are poised to increase consumer buying power and lower shipping expenses.

2. The latest jobs report shows unemployment below 5% for the first time since the recession kicked off in 2008.

3. Payrolls have advanced 2.5% year over year

4. Retail has added 58,000 jobs.

5. The Georgetown Institute for Consumer Research just reported that January 2016 spending was 40% higher year over year.

http://www.investopedia.com/ask/answers/05/economicmoat.asp

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On a pure earnings basis, Amazon may still trade at a significant premium, but the company sports a reasonable price-to-sales ratio of 2.2 and is sitting on 125% quarterly earnings growth, 21.9% quarterly sales growth, a cash pile of $19 billion, and nearly half a billion in annual income.

To put it simply, Amazon is an absolute giant, it’s not going anywhere, it’s only getting bigger, and it will eventually start paying dividends...

If you want to own a piece of that and you don’t already, now’s the time to start picking up shares.

Amazon.com, Inc. (NASDAQ: AMZN) is a Buy under $535. The risk level is Low.

Music to Our Ears

If you’ve been a reader of these pages for a while, you know we usually don’t focus so heavily on highbrow companies, but with the entire market being cut down to size, this month seems to be an exception...

One well-known tech stock that’s taken an absolute beating lately is Internet radio firm Pan-dora Media, Inc. (NYSE: P). Shares have plummeted from highs of $37.00 in early 2014 to near record lows at around $8.00 a share today.

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To be frank, I’ve never been a big fan of Pandora as a business. A “freemium” model can only excel when premium features considerably outweigh free offerings, and this has hardly been the case with Pandora radio...

At the same time, though, Pandora has a massive, albeit plateauing, user base. Its music discov-ery algorithm also remains one of the most user-friendly services out there, so while there might not be too many people paying for it, there are plenty out there still listening.

At over 81 million devoted listeners, Pandora still has a fair amount of value left, particularly to larger tech companies looking to expand their own music offerings.

Apple bought Beats Music for $3 billion in 2014, and Google purchased Songza the same year. Not to mention there are private companies like Spotify, which is valued at $8 billion. Putting all this into perspective, Pandora’s $1.5 billion market cap is probably looking like a bargain at this point for any potential suitors...

This is why we were especially intrigued to see Pandora shares rise ~8% earlier this week on a New York Times report that the company may be putting itself up for sale. It has apparently hired Morgan Stanley to facilitate any potential deals.

Shortly after these initial rumors, Pandora announced disappointing fourth-quarter earnings, sending shares plunging back down once again. Of course, if you’re buying on the rumor of a sale, earnings are of far less concern...

According to FBR & Co. analyst Barton Crockett, Apple, Amazon, Facebook, and Spotify are all potential suitors to purchase Pandora. We also believe Sirius and Microsoft could be poten-tial buyers, too, but there are obviously no guarantees here.

We’re going to take a small gamble on Pandora in light of the recent M&A rumors. If there turns out to be any real substance to the New York Times piece, there’s a good chance we could see a quick rally. If not, we’ll likely want to exit our position before the company’s next earn-ing’s call.

Nonetheless, it’s worth taking a brief look at the key stats so we know what we’re getting into:

• Market cap of $1.69 billion

• Revenue of $1.16 billion

• Price-to-sales of 1.52

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• -14.58% profit margin

• 25.4% quarterly revenue growth

• -$169 million net loss

• $370 million cash/$234 million debt

The numbers don’t fit the bill of a company we normally go after, but this is a special situation we’d rather take the risk on than ignore. Make sure to keep an eye out in future issues as the story develops.

Pandora Media, Inc. (NYSE: P) is a Buy under $8.50. The risk level is Medium.

Portfolio Snapshot and Updates

Ambarella Inc. (NASDAQ: AMBA)

Snapshot:

Ambarella develops low-power, high-definition video compression and image processing components. The company’s products are used in a variety of high-definition and ultra-high-definition cameras including: security IP-cameras, sports cameras, wearable cameras, aerial cameras, and automotive video came recorders. Ambarella’s compression chips are also used in broadcasting TV programs worldwide.

Updates:

Last month we doubled down on Ambarella near $37.00 a share. The stock has since been generally supported at this level, with shares trading closer to $39.00 as I write. We will not be adding any weight this month, but our rating will be unadjusted.

There is no official news for Ambarella this month, but investors should be aware that OTR Capital is now reporting that Qualcomm Inc. (NASDAQ: QCOM) will be targeting two of Ambarella’s leading clients, DJI and GoPro, with its “Snapdragon Flight” drone platform.

From a current revenue standpoint, there’s minimal downside here, but should Qualcomm man-age to steal either customer, it would take a dent out of Ambarella’s growth prospects. We’ll be sure to keep you updated as the story progresses.

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In additional news, Ambarella has received another upgrade, this time from Dougherty and Company, which has a $43.00 target on the stock.

Last but not least, earnings are due to surface on March 3 after market close. You can access the call at Ambarella’s IR page here. As always, keep an eye out next month for our take on the call.

We rate Ambarella (NASDAQ: AMBA) a Buy under $45.00. The risk level is Low.

Analog Devices, Inc. (NASDAQ: ADI)

Snapshot:

Analog Devices is a semiconductor company specializing in data conversion and signal process-ing technology. The company develops analog-, mixed-, and digital-signal processing integrated circuits (ICs) used in industrial, automotive, consumer, and communication markets worldwide

Updates:

We have no official news for Analog this month, but the company will be reporting first-quarter fiscal 2016 results after market close on February 17.

Due to the timing of the call and the release of this month’s issue, we will not have time to sift through the details until our March Issue. That said, we don’t expect any negative surprises on the call. If something pertinent comes up, we will be sure to send out an interim update.

Until then, you can access the call at Analog’s IR page here.

We rate Analog Devices (NASDAQ: ADI) a Buy under $50.00. The risk level is Low.

Applied Materials, Inc. (NASDAQ: AMAT)

Snapshot:

Applied Materials is an American manufacturer that supplies various equipment, services, and software to semiconductor fabricators — among other technology-based industries — to enable the manufacture of a wide range of electronic components.

http://investor.ambarella.com/events.cfmhttp://investor.analog.com/events.cfm

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Updates:

No big news for Applied Materials this month, minus the appointment of Adrianna Ma to the company’s Board of Directors.

Normally we don’t pay too much mind to board appointments, but Ma was an investment banker in the “Mergers, Acquisitions and Restructuring Department” at Morgan Stanley, so this one is kind of interesting. We love AMAT as a long-term hold, so we can only hope Ma is there to encourage some inorganic growth rather than find ways to put the company up for sale.

As a reminder, AMAT approved a $0.10 per-share dividend last month, payable on March 17 to shareholders of record as of February 25.

We rate Applied Materials a Buy under $18.00. The risk level is Low.

CalAmp Corp. (NASDAQ: CAMP)

Snapshot:

CalAmp Corp. provides wireless communications solutions for various applications worldwide. It offers solutions for mobile resource management, machine-to-machine (M2M) communica-tions, and other emerging markets that require connectivity. Its M2M and MRM solutions enable customers in energy, government, transportation, and automotive markets to optimize their operations by collecting, monitoring, and reporting business-critical data from remote and mobile assets.

Updates:

CalAmp remains one of my favorite stocks in our portfolio, and frankly the entire market right now. It’s slowly becoming a powerhouse in its respective field, yet it trades at a sub-billion-dollar market cap and remains relatively unknown to most investors.

As the company continues to mature, though, CalAmp has been gaining an increasing amount of institutional attention. Since 2013, the stock has seen four coverage initiations, all over-whelmingly positive. This month, CalAmp received another positive outlook from Canaccord Genuity, with a Buy rating and price target of $29 (the stock currently trades under $17.00).

This positive institutional sentiment follows CalAmp’s recent acquisition of LoJack Corp. (NASDAQ: LOJN). LoJack shareholders were the immediate winners in this deal, but CalAmp shareholders should expect to be rewarded over the long run.

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Taken straight from Canaccord:

“We believe LoJack’s business model is a natural fit with management’s long-term strategies and also meets management’s four acquisition criteria of gross margin accretion, non-GAAP earnings accretion, vertical market alignment and/or channel leverage, and ease of integration.”

To put things a bit more simply, CalAmp will leverage LoJack’s offerings to position itself strongly in connected car and vehicle telematics applications. With virtually all major automo-tive companies now promising to embrace driverless and connected vehicles within the next five years or less, we can only expect CalAmp to benefit.

CalAmp (NASDAQ: CAMP) is a Strong Buy under $20.50. The risk level is Medium.

Corning Inc. (NYSE: GLW)

Snapshot:

Corning Inc. manufactures high-quality ceramic and glass material for consumer and industrial applications. The company is best known for its incredibly durable Gorilla Glass, commonly found in consumer devices such as smartphones and tablets.

Updates:

Last issue we doubled down on Corning, and our commitment to the company has already begun to pay off. The company crushed earnings late last month, sending shares up 6.9% on the session.

While revenue was slightly below expectations, Corning was able to reel in expenses and beat EPS estimates by $0.02. Management also suggested pricing relief on LCD glass later this year, saying that we can expect a recovery following the first quarter of 2016.

Corning has also rewarded investors with a 1.5-cent increase in its quarterly dividend (now 13.5 cents), representing a 12.5% increase from its prior dividend of $0.12. There are still some headwinds in the short term, but if you’re looking for a long-term dividend payer, Corning remains a great stock at a bargain price.

Corning Inc. (NYSE: GLW) is a Strong Buy under $20.00. The risk level is Low.

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Fabrinet (NYSE: FN)

Fabrinet provides foundry services to optics OEMs. In short, the company has high-level expertise at putting together optical components for other optoelectronic companies using its precision process technologies. The company’s technologies and systems include materials and process analysis, optical and electro-mechanical assembly, fiber handling and alignment, packaging, and various testing services.

Updates:

Fabrinet reported second-quarter earnings earlier this month, beating analyst forecasts and continuing its strong upward momentum.

CEO Tom Mitchell summed up the company’s positioning pretty much perfectly:

“We delivered a strong second quarter with record revenue and strong profitability. Upside in the quarter was driven by a combination of growth from new customer programs and increasing production from existing customer programs, as we benefit from technology investments that we continue to make. While we have sufficient ca-pacity to meet our growing customer demand for several quarters, construction of the first new building at our new campus outside Bangkok is underway, which will help drive further profitable growth over the longer-term.”

As for the main highlights, here is what you should know from the call:

• Revenue at $233.0 million, an increase of 24% over the same period last year.

• Optical communications represented 72% of total revenue (split 54/46 telecom and datacom).

• Revenue from new businesses represented 25% of total revenue.

• Currently operating at ~75% capacity, leaving plenty of room for growth.

• Net income at $19.8 million, compared to $8.7 million in the second quarter last year.

• Third-quarter revenue outlook in the range of $240 million to $244 million (prior consensus called for just $214 million).

All said and done, Fabrinet is on an absolute tear right now. It’s completely defying the bear

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market and has yet to show any signs of slowing down. There could be a pullback in share price following this month’s rally, but the business outlook remains incredibly strong.

Perhaps most notable from this quarter’s earnings was Fabrinet’s ability to penetrate the grow-ing datacom market. What was once an income statement heavily weighted towards telecom is now a near 50/50 split, with datacom revenue up 64% year-over-year.

Fabrinet (NYSE: FN) is a Hold at current prices. The risk level is Medium.

Fanuc Corporation (OTC: FANUY)

Snapshot:

Fanuc Corporation is a leader in industrial robotics, with a product lineup that includes factory automation systems, laser cutting, motion control, and compact motors. Fanuc serves a wide range of industries including aerospace, agriculture, construction, metal forming, and automo-tive manufacturing.

Updates:

No news or updates for Fanuc this month.

Fanuc Corporation (OTC: FANUY) is a Strong Buy under $27.00. The risk level is Low.

Flex Inc. (NASDAQ: FLEX)

Snapshot:

Flextronics International (recently re-branded as Flex) provides customized electronics manu-facturing services (EMS) to original equipment manufacturers (OEMs) in the electronics indus-try. The company also supports supply chain efforts through services packaging, transportation, design, maintenance, repairs, etc.

Over the years, Flex has developed a long customer list of recognizable OEMs including Cisco Systems, Dell, Eastman Kodak Company, Ericsson Telephone Company, Hewlett-Packard, Kyocera, Microsoft, Motorola, Nortel Networks, Sony-Ericsson, and Xerox.

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Updates:

Some of you may have noticed that Flex Inc. (previously Flextronics) jumped 9.8% on a single session late last month, thanks to a stellar third-quarter earnings call. Once again, our decision to go against the grain and actively scoop up more shares seems to be paying off so far.

Flex posted earnings-per-share of $0.35, beating the prior consensus of $0.31. The company posted revenue of $6.76 billion, beating consensus by $250 million. Here are the key take-aways:

• Revenue up $446 million (7% sequential growth).

• Excluding a sales decline from Lenovo, every one of Flex’s business segment groups grew year over year, with overall business rising over 6%.

• Income saw a 12% year-over-year increase and 28% increase sequentially.

• Return on invested capital was 22.4%, exceeding Flex’s previous targeted level of 20%.

• Expanded diversification efforts across a range of industries.

• Invested $90 million to repurchase over 8 million shares, or roughly 2% its own float during the quarter.

Flex Inc. (NASDAQ: FLEX) is a Buy under $11.00. We are reducing the risk level to Medium.

GoPro, Inc. (NASDAQ: GPRO)

Snapshot:

GoPro, Inc. manufactures a line of standalone high-definition action cameras, with its flagship “Hero” product line. The company also produces various mounting accessories for its cameras and software applications for video editing and social media.

Updates:

Last Monday, a Barron’s article suggested GoPro may be drawing some merger and acquisition interest from a number of tech companies with the cash to spare. Suggested suitors included

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Sony and Microsoft, but there’s not much more to go off here besides speculation.

Part of the idea that Microsoft would be a potential suitor stems from a recent patent-sharing agreement between the two companies, which will give GoPro access to certain file storage and system technologies patents from Microsoft Technology Licensing. Little is still known about GoPro’s plans for these patents, but we will keep you updated as the story progresses.

GoPro, Inc. (NASDAQ: GPRO) is a Buy under $14.00. The risk level is Medium–High.

Himax Technologies, Inc. (NASDAQ: HIMX)

Snapshot:

Himax Technologies, Inc. is a fabless semiconductor company headquartered in Tainan City, Taiwan. The company seems to have intentions to infiltrate the world of virtual and augmented computing. Facebook uses its video processing chips for the Oculus Rift, while Microsoft and Google use its near-field displays for the HoloLens and Project Aura (previously Google Glass).

Updates:

Himax reported solid fourth-quarter earnings, beating pre-announced guidance this month. You can find a breakdown of the most important details below:

• Revenue was $178 million, representing a 7% sequential increase and a 21.7% increase year-over-year.

• Income at $6.1 million.

• Gross margin for the quarter was 22.9% (up slightly).

• Increased market share of large panel driver ICs.

• Added a “major smartphone customer” for small- and medium-sized driver ICs.

• Business from Chinese smartphone makers grew significantly.

• Lost a major Korean customer (likely Samsung) to an OLED provider (likely Uni-versal Display). This helped offset the growth in Chinese market. Himax is already working on regaining the customer through an OLED deal.

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Specifically on the topic of virtual and augmented reality, management reported “shipments of AR/VR related products,” with CEO Jordan Wu saying the following:

Last but not least, some of the world’s largest and most impactful technology com-panies that continue to work closely with us on our AR/VR devices using our LCOS, WLO and/or driver IC solutions. Some of them have announced the launch of their products in 2016. We are seeing strong momentum across all our major product lines and feel excited about the growth prospect of 2016, despite the uncertain economic environment...

...Separately, we have officially broken into the VR space with major design wins taking place toward the end of 2015. Our expertise in customized display solutions in OLED driver IC timing controller and power management ICs have led to ASIC developments that will go into the next generation panels of several VR devices. With multiple AR/VR players announcing their product launches in 2016, we stand to benefit from these new businesses. I will elaborate more when providing first-quarter outlook.

No doubt, our early thesis on Himax is so far panning out. The company is holding up in its cur-rent business environment while breaching the emerging AR/VR market. While we don’t expect any major impact from these shipments in the next 10-Q, the story should ramp up significantly through the rest of 2016.

Himax (NASDAQ: HIMX) is a Buy under $9.00. The risk level is Medium.

Intel Corporation (NASDAQ: INTC)

Snapshot:

Intel Corporation designs, manufactures, and sells integrated digital technology platforms worldwide. It is the single-largest provider of semiconductors by revenue. It operates through PC Client Group, Data Center Group, Other Intel Architecture, Software and Services, and “All Other” segments.

Updates:

No major news or updates for Intel this month.

Intel Corporation (NASDAQ: INTC) is a Buy under $34.00. The risk level is Low–Me-dium.

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International Business Machines (NYSE: IBM)

Snapshot:

IBM is an American multinational technology and consulting corporation, with headquarters in Armonk, New York. IBM manufactures and markets computer hardware, middleware, and software. The company provides infrastructure, hosting, and consulting services in areas rang-ing from mainframe computers to nanotechnology.

Updates:

IBM has acquired two creative digital agencies this month, including Berlin-based Aperto and U.S.-based agency Resource/Ammirati. In short, these purchases give IBM added weight when selling specialized design expertise for building mobile apps and other digital experiences — specifically for enterprise applications.

The acquisitions are part of a continuous pivot in IBM’s core business. The company is still looking for its next hit product, but for now it remains a solid dividend play.

International Business Machines (NYSE: IBM) is a Buy under $140.00. The risk level is Low–Medium.

InTEST Corp. (NYSE: INTT)

Snapshot:

INTT is a semiconductor capital equipment company, which means it manufactures machines used in the production of electronic components.

The semiconductor capital equipment industry can be divided into two classes: front-end and back-end. The front-end involves silicon wafer and computer chip fabrication. The back-end involves assembly, packaging, and testing.

InTEST works on the back-end of this cycle, providing automatic test equipment (ATE) used by semiconductor manufacturers to test their integrated circuits and wafer products.

Updates:

InTEST Corp. announced late last month that it would be combining its Electrical and Mechani-cal product segments to create a new entity: the inTEST EMS Products Division. According to

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the official press release, “the new business unit will provide the semiconductor industry with the company’s precision-engineered equipment.” This includes InTEST’s manipulators, dock-ing, and interface solutions.

InTEST Corp. (NYSE: INTT) is a Hold at current prices. The risk level is Medium.

Iridium Communications Inc. (NASDAQ: IRDM)

Snapshot:

Iridium is a global communications provider. The company offers the world’s most extensive voice and data service through a fleet of next-generation low-orbit satellites. It is currently launching the NEXT satellite constellation to serve the machine-to-machine (m2m) communica-tions market.

Updates:

No official news for Iridium this month, but the company will report fourth-quarter fiscal 2015 earnings on February 25, before open. As always, you can expect an update on that next issue. Until then, you’ll be able to access the call live and after it airs here: http://investor.iridium.com/eventdetail.cfm?EventID=169076

Iridium Communications Inc. (NASDAQ: IRDM) is a Hold at current prices. The risk level is Medium.

iRobot Corporation (NASDAQ: IRBT)

Snapshot:

iRobot is an American robotics company that serves the consumer, medical, enterprise, and military industries. iRobot’s product functions range from home cleaning to telecommunication to various military operations. iRobot currently generates the vast majority of its revenue from its Home Robotics division.

Updates:

We’ve had a lot of winning calls this month, but iRobot’s was a mixed bag this quarter. On the up side, the company posted an extremely strong quarter, but this also came hand in hand with disappointing guidance for 2016.

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iRobot earned $0.65 a share on sales of $206.4 million for the quarter, which pretty much crushed the consensus $0.57 a share on sales of $202.8 million. On a year-over-year basis, earnings per share were up 110%, and sales were up 30%.

For fiscal 2016, though, the robotics company is targeting $1.30 earnings per share on $636 million in sales at the midpoint of guidance. Analysts were looking much higher, with a target EPS of $1.64 on sales of $692.9 million.

Of course, it’s not like we haven’t seen iRobot be cautious in its guidance in the past. Chances are good we’ll see some positive revisions moving forward, and even if not, iRobot is a power-house in its respective space. There’s little reason for concern here.

iRobot (NASDAQ: IRBT) is a Hold at current prices. The risk level is Medium.

JinkoSolar (NYSE: JKS)

Snapshot:

JinkoSolar (NYSE: JKS) is a Chinese firm that makes a variety of photovoltaic (PV) products, including solar modules, solar cells, silicon ingots, and silicon wafers. The company operates internationally (69% outside of China) in two segments: manufacturing and solar projects.

Updates:

No news or updates for Jinko this month.

JinkoSolar Holding Co. is a Strong Buy under $22.00. The risk level is Medium.

LG Display Co. (NYSE: LPL)

Snapshot:

Not to be confused with LG Electronics, LG Display is its own independent company with a niche focus on panel technology. It is one of two organic light-emitting diode (OLED) compa-nies trading on the public market.

Beyond becoming the new standard for crystal-clear resolution, the flexibility of OLED allows displays to wrap around the edges of devices, providing more surface area and multiple viewing angles.

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OLED displays can be rolled up into a tube for easy transportation or worn like wristbands. The technology can create a more panoramic viewing experience on curved televisions and can even be used as virtual paper.

Updates:

LG display reported a disappointing quarter late last month, showing a significant decline in profit due to low consumer electronic demand, which has weighted down panel prices as of late.

The company said that the pace of decline on average selling price of panels will slow starting the first quarter of this year, albeit joined by lower unit sales.

To be blunt, 2016 is setting up to be a relatively unexciting year for LG Display, and we’re not expecting any big moves. Regardless, the company remains priced well below the broader mar-ket on an earnings basis with a solid dividend payout and long-term security in panel revenue.

LG Display Co. (NYSE: LPL) is a Hold at current prices. The risk level is Low–Medium.

Micron Technology Inc. (NASDAQ: MU)

Snapshot:

Micron is best known for producing many forms of semiconductor devices. This includes DRAM, SDRAM, flash memory, and SSDs. Its consumer products are marketed under the brands Crucial Technology and Lexar. The company was named one of the Thomson Reuters Top 100 Global Innovators in 2012 and 2013. It is ranked among the top-five semiconductor-producing companies in the world.

Updates:

Micron held its annual analyst day event last week, offering a range of industry forecasts, including smartphone, PC, and “connected auto” markets. The market took the information provided well, sending Micron shares up 3.4% on the session.

There’s a bit too much to cover here, but I strongly encourage any shareholders to review Micron’s webcast presentation here accompanied by the following slide deck.

Initial market reactions included reaffirmed Outperform ratings from Wells Fargo and Cowen and Co. David Wong of Wells Fargo summed up the forward-looking outlook as neatly as pos-sible:

http://edge.media-server.com/m/p/h3bxtspwhttp://files.shareholder.com/downloads/ABEA-45YXOQ/1503994947x0x875021/4BEAA02E-BBC2-402C-A51D-B3B2C6B8C3D4/Winter_Analyst_Day_2016.pdf

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“Looking ahead: DRAM bit output is expected to take a step up in the second half of 2016, level off in the first half of FY17 and the begin rising in the second half of 2017. The FY17 vs FY15 expected CAGR for DRAM bit shipments is 20-30%. NAND bit output is expected to continue drifting sideways through much of the rest of FY16, and then ramp steadily with a fairly steep slope through FY17, driven, we think, by ramp-ing 3D NAND output. The FY17 vs FY15 expected CAGR for NAND bit shipments is 30-40%.”

Micron Technology Inc. (NASDAQ: MU) is a Strong Buy under $15.00. The risk level is Low–Medium.

Newport Corp (NASDAQ: NEWP)

Snapshot:

Newport supplies advanced-technology and instrumentation products to various industries, including scientific research, microelectronics, defense and security, life and health sciences, and industrial manufacturing.

The company specializes in two main areas: photonics and motion control. Motion control allows its customers to build machines with precise movement and positioning. Photonics involves the use of light for precision measurement and communication. Newport’s photonics products include lasers, optics, fiber optics, and electro-optical devices. Its motion control products include linear stages, alignment stages, rotation and tilt stages, etc.

Updates:

No news or updates for Newport this month.

Newport Corp (NASDAQ: NEWP) is a Buy under $15.00. The risk level is Medium.

NXP Semiconductors N.V. (NASDAQ: NXPI)

Snapshot:

NXP specializes in near-field communication (NFC) technology. NFC allows for wireless com-munication between devices at very short distances with increased security. The technology is being used in public transport, event ticketing, home health care, patient identification, interac-tive museum exhibits, contactless credit cards, and as hotel keys, just to name a few markets.

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Updates:

NXP reported full-year earnings on February 3, showing revenue of $6.1 billion, up 8% from 2016 despite an especially difficult semiconductor market and strong macro headwinds. Nearly all of NXP’s operating segments delivered positive growth for the year (automotive was espe-cially strong), with overall EPS showing 18% growth.

Perhaps most importantly, the firm reported that the Freescale merger is officially complete with all synergies on track. All said and done, NXP forecasts sales to rise up to 55% as a result of the Freescale deal. We expect 2016 to be a big year for the firm.

NXP Semiconductors N.V. (NASDAQ: NXPI) is a Strong Buy under $74.00. The risk level is Low–Medium.

Oceaneering International, Inc. (NYSE: OII)

Snapshot:

Oceaneering International provides engineering services and hardware primarily to customers operating in marine environments. The company’s services are marketed to oil and gas compa-nies as well as the aerospace and construction industries. The company receives the bulk of its revenue from ROVs and Subsea Products.

Updates:

Oceaneering released full-year financial results last week, posting revenues of $722.1 million and net income of $27.5 million. Results closely matched analyst expectations on earnings, while exceeding revenue forecasts by about $27 million.

Notably, the company expects to maintain its current quarterly cash dividend of $0.27 per share throughout 2016. While most oil-related companies are completely floundering, Oceaneering is proving it can weather the storm much better than direct producers.

From management:

We believe our liquidity (including $385 million of cash at year-end), demonstrated cash flow generating capabilities, and $500 million revolving credit facility provide us with ample resources to manage our business through the current environment of reduced demand for our services and products.

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As for what lies ahead, the firm projects that all of its oilfield business segments will have lower operating income in 2016 than in 2015 but would not give EPS or revenue ranges. Despite these headwinds, we remain very bullish on OII’s long-term deepwater opportunities.

Oceaneering International, Inc. (NYSE: OII) is a Hold at current prices. The risk level is Low–Medium.

Opko Health, Inc. (NYSE: OPK)

Snapshot:

OPKO Health is a mid-stage biotechnology development and medical diagnostics company. OPK has a deep drug candidate pipeline spanning from kidney disease to cancer treatments. It also provides a revolutionary diagnostic test known as the 4Kscore, used in prostate cancer screening. The company’s proprietary diagnostic technologies allow doctors to keep blood-based tests in house rather than outsourcing to outside laboratories.

Updates:

Opko CEO and Chairman Dr. Phillip Frost continues accruing shares of his company, this time 102,000 more at an average price of $7.96. Nothing new here really, but man does this guy have deep pockets.

Speaking of deep pockets, Opko has purchased interest in yet another private biotech firm with an approximate 6.3% stake in novel oncology therapeutics company Xenetic. We don’t know too much about Xenetic just yet, but we tend to put our initial trust in Frost with these kinds of things:

Xenetic has many novel technologies that address unmet needs in various orphan cancer indications, and we believe the science and the clinical strategy have the promise to create significant shareholder value

Keep an eye out for a bit more information on Xenetic next issue.

Opko Health, Inc. (NYSE: OPK) is a Buy under $11.00. The risk level is Medium.

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Photronics Inc. (NASDAQ: PLAB)

Snapshot:

Photronics is a small technology firm that provides a unique fabrication tool for creating ad-vanced chip circuit designs — something called a photomask. Photomasks are essentially high-precision plates made of quartz that contain images to be printed microscopically on electronic circuits. In short, photomasks use light to transfer complex, geometric patterns onto computer chips

Updates:

No news or updates for Photronics this month.

Photronics (NASDAQ: PLAB) is a Buy under $13.50. The risk level is Medium.

Science Applications International Corporation (NYSE: SAIC)

Snapshot:

SAIC helps governments integrate technologies by providing full life-cycle services. This includes but is not limited to hardware engineering, program management, training and simula-tion, cloud computing services, software design, and logistics/supply chain support.

At its core, SAIC is a company that leases talent. The company has ~13,000 employees, 68% of whom are deployed to customer sites. Its value rests primarily in this talent base and the relationships it’s built with clients over the years.

Updates:

SAIC saw two positive pieces of coverage this month following last month’s half-billion-dollar NASA contract, with an Outperform upgrade from Wells Fargo and an initiated Buy rating from Jefferies.

In slightly more tangible news, SAIC has stepped up its game in military transport, having unveiled its newest amphibious vehicle, or AAV Survivability Upgrade (SU) — essentially an armor improvement for the standard Marine amphibious transport.

From a revenue standpoint, the AAV news is minimal, but it helps give some additional perspec-tive as to the kinds of specialty integration projects SAIC is involved in.

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Science Applications International Corporation (NYSE: SAIC) is a Buy under $48.00. The risk level is Medium.

Synaptics Inc. (NASDAQ: SYNA)

Snapshot:

Synaptics designs and manufactures human interface solutions for mobile computing, com-munication, and entertainment devices. Most notably, the company creates chips used for processing touchscreen movements in mobile devices. The company’s clients include Google (NASDAQ: GOOG), Amazon (NASDAQ: AMZN), Blackberry (NASDAQ: BBRY), Nokia (NYSE: NOK), Samsung (KSE: 005930), HTC, LG, and Sony.

Updates:

Rumors continue to circulate this month surrounding Synaptics (NASDAQ: SYNA) as the target of a Chinese-led acquisition. We can’t speculate on these developments more than we have already. For the time being, we’re more concerned with business operations...

Synaptics reported second-quarter earnings late last month, reporting revenues of $470.50 million and net income at $35 million. Business was largely flat on a sequential basis, with not much to go off of during the call besides softened forward guidance.

Maybe the biggest piece of news for Synaptics this month is its potential entry into the automo-tive market with 3D touch. The company is reportedly developing an automotive touchscreen for cars that detects how hard a user is pressing on it, the idea being that it would allow users to more safely control vehicle cabin applications. With the Apple Car becoming an increasingly likely possibility, this sets Synaptics up nicely as a potential supplier.

Synaptics Inc. (NASDAQ: SYNA) is a Hold at current prices. The risk level is Medium.

Vishay Intertechnology Inc. (NYSE: VSH)

Snapshot:

Vishay Intertechnology is the world’s number-one manufacturer of infrared optoelectronic components. The company offers a broad range of optoelectronic components (both visual and non-visual), including optocouplers, optical sensors, transceivers, LCD displays, infrared emit-ters, etc. Vishay targets a wide customer base across various industries including the automo-

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tive, aerospace, consumer, industrial robotics, telecommunications, renewable energy, medical, and computer hardware markets.

Updates:

Vishay reported fourth-quarter earnings last week, posting a notable loss due to non-recurring tax charges netting $152 million and restructuring charges of $10 million.

Without making things too complicated, the company had to incur the charges to gain access to cash that’s been spread out across a number of its subsidiaries. The market has long been aware of Vishay’s liquidity issue, which is why there was no negative reaction following the report.

There were no real surprises this quarter. Gross margin came in at 23%. Adjusted operating margins were at 7%. Non-GAAP earnings per share were $0.14. Management talked a lot about macroeconomic headwinds, as has virtually everyone this earnings season. Nothing to change our outlook going on here.

Vishay Intertechnology Inc. (NYSE: VSH) is a Buy under $12.00. The risk level is Me-dium.

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