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Vahan's View on RF
01/27/2006 12:00 am EST
Vahan Janjigian approaches investing with the eye of a sophisticated scholar, applying capital market theory, portfolio management, fundamental skills, and quantitative analysis. For his 2006 favorite, he offers a speculative tech play on radio frequency communications.
"Sirenza Microdevices (SMDI NASDAQ), a small-cap company currently generating about $60 million per year in revenues, designs radio frequency (RF) components used in communications devices in both the commercial and military markets. These products help improve reception and transmission of voice and data signals in both wireless and wireline applications.
"Slightly more than half its revenues and operating profits are produced by the Signal Source segment, which makes multi-component modules used to generate and control RF signals. The Amplifier segment makes various kinds of amplifier products primarily composed of integrated circuits made from semiconductor wafers. More than three-fourths of the company's sales come from abroad, and 17% of net revenues come from Solectron, a contract manufacturer for Motorola. Other key customers include Ericcson and Nokia.
"Although revenues have been flattening, the company experienced strong growth in recent years due to three key acquisitions. The focus is now shifting to integrating these acquisitions and realizing their synergistic effects. However, since the company recently boosted revenue projections for the most recently completed quarter, we think SMDI could see sales close to $75 million. Furthermore, 2006 earnings per share should double from 2005 levels. Assuming the year progresses as expected, SMDI could rise to the high single-digits by year end."
Editor's Note: We would emphasize to readers that when Vahan submitted this selection, the stock was trading in the low 5s. The stock has since jumped sharply in price.
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