What Would Joe Do?
Peggy Aycinena is a freelance journalist and Editor of EDA Confidential at www.aycinena.com. She can be reached at peggy at aycinena dot com.
Hypothetical Stock Index: Lip-Bu Tan vs. EDAC
January 20th, 2016 by Peggy Aycinena
So, here’s the hypothetical: Given Lip-Bu Tan’s involvement with a $2 billion investment group – efforts interleaved with his responsibilities as Cadence CEO – wouldn’t it have been wise to harvest stock tips from his press meeting back in March 2014 in Santa Clara?
Of course, we would want to diversify the portfolio, so let’s presume we invested $120,000 in mid-2014 and split the amount between the Lip-Bu Tan Index – GoPro, Netlix, Tesla – and the EDAC Index – Synopsys, Cadence, Mentor Graphics, PDF Solutions, ANSYS, and ARM.
How would we be doing today? The answer is interesting.
The $60,000 we invested in the Lip-Bu Tan Index – $20,000 each in GoPro, Netflix, and Tesla – would now be worth $12,980 + $34,312 + $16,868 = $64,160.
The Lip-Bu Tan Index would have yielded an approximate plus 7% return from mid-2014 through today. [Note: that’s not an annual yield, but a cumulative one.]
The $60,000 we invested in the EDAC Index – $10,000 each in Synopsys, Cadence, Mentor Graphics, PDF Solutions, ANSYS, and ARM – would now be worth $10,590 + $10,950 + $7,800 + $4,550 + $11,440 + $9,090 = $54,420.
The EDAC Index would have yielded approximately a minus 9.3% return from mid-2014 through today. [Again: not an annual yield, but a cumulative one.]
And what can we conclude from these results?
1) Always diversify, because the future is an unknown. Today’s big flier may be tomorrow’s bust.
2) New companies with ‘buzz’ such as GoPro, or even established companies with ‘buzz’ such as ARM, can surprise us with disappointing results.
3) Non-EDA industries continue to outperform EDA with frustrating regularity.
4) The EDA industry may continue to employ the smartest people in the world, but not necessarily the richest.
5) That’s amusing because Synopsys, Cadence, Mentor Graphics, PDF Solutions, ANSYS, and ARM can live without GoPro, Netflix, or Tesla. But GoPro, Netflix and Tesla absolutely cannot live without Synopsys, Cadence, Mentor Graphics, PDF Solutions, ANSYS, and ARM.
* Mentor Graphics
* PDF Solutions