ESDA Market Timing: I’ve got the horse right here

January opened with a thud this year from a stock market point of view. Just a handful of days into 2016, things looked really bad, although it got slightly better by the start of February. Since then everything’s pretty much been up and to the right – at least for the five publicly traded companies whose CEOs sit on the board of the ESD Alliance.

The question is, of those five – ARM, Cadence, Mentor Graphics, PDF Solutions, Synopsys – which company should you have discerned in January would outperform the rest by the end of August? On which horse should you have put your money back in January, so you’d be the envy of the guys in August?

Of course, you’ll be guessing the answer is ARM. After all, everybody learned in July (when it was too late to bet on that horse) that ARM was about to be snatched up in an earth-shattering acquisition – a peculiar nod to anti-Brexit globalization that saw Japan-based SoftBank purchase UK-based ARM for a cool $32 billion.

Had you known back in the dog days of January about the ARM-SoftBank drama of July, you could have placed a bet in the winter that would have paid off in spades in the summer. Hindsight always being a 20-20 affair.

Surprisingly, however, if you had put your money on ARM, that bet would have been wrong. Completely wrong.

Because the real winner over the last 8 months, the company that’s overshadowed ARM’s stock rise, is the one organization among the five companies with the least pizzazz, the least sizzle, the least name recognition – not to mention the least face recognition.

In fact, the CEO of this company – although purported to be on the Board of Directors of the ESD Alliance – has neither been seen nor heard from within this calendar year at any one of the lively events hosted by ESDA since the first of January.

Nonetheless, it is his organization that is the big winner here in 2016 – even after taking into account the ginormous M&A associated with ARM. The big winner in the horse race – the one you should have bet on to prove your ability to time the market – is PDF Solutions.

Yep, for real. Just look at the numbers.

Start with stock values of the five companies on January 4, 2016 – the first day of trading in this calendar year – and watch how those stock values dribble down through that dreary month, until the start of an equally miserable and gray February.

• ARM Holdings – from $44.41 on January 4th, down to $43.63 on February 1st (bottoming at $41.42 mid-January)
• Cadence – from $20.53 down to $19.54 (bottoming at $18.56 mid-January)
• Mentor Graphics – from $18.24 down to $17.43 (bottoming at $16.24 mid-January)
• PDF Solutions – from $10.41 down to $10.36 (bottoming at $8.99 mid-January)
• Synopsys – from $44.92 down to $42.52 (bottoming at $40.53 mid-January)

Of course, dreary only hangs around for so long. Then suddenly it’s Spring, with Summer not far behind. Everybody gets lively, or at least livelier, and the stock market responds to the cheeriness.

Hence by August 31st of this year, the stock prices of every one of the five companies had risen markedly.

• ARM Holdings – up to $66.28 by August 31st
• Cadence – up to $25.54 by August 31st
• Mentor Graphics – up to $24.01 by August 31st
• PDF Solutions – up to $16.75 by August 31st
• Synopsys – up to $59.29 by August 31st

But these are just the raw numbers. Only by looking at the percentage increases can you see the real winner.

Here they are, ranked in order of success.

• Cadence – up 37.61%
• Synopsys – up 46.29%
• Mentor Graphics – up 47.84%
• ARM Holdings – up 60.02%
• PDF Solutions – up 86.32%

Wow. A stunning increase of 86.32% value in the stock of little-talked-of PDF Solutions.

Only three conclusions can come of this analysis. Actually, four …

One, poor Lip-Bu Tan. He’s the CEO of a major EDA company, but also spends chunks of time leading a group of investors who, by his own report, manage upwards of $2 billion in VC funds. From a sheer percentage-increase point of view, owning PDF Solutions over the last 8 months would certainly would have been the best bet for that big pile of cash. Did they?

Two, clever Lucio Lanza. He’s chairman of the board at PDF, and owns 289,623 shares of the company. If we assume his holdings remained unchanged over the course of the year, his dollar stake in PDF went from $3,014,975 in January to $4,851,185 – an increase of $1,836,340 that exceeds the monetary compensation Tan receives for serving as CEO at Cadence.

Three, it’s a free country. Any one of you could have put your money on any one of these five horses back in the dark days of January – and any one of those horses would have all rewarded your confidence. Buy low, sell high.

And four, if you’re as smart as you think you are, you should have been able to time the market and known to put all of your bets on just one horse back on January 13th when the market bottomed. Had you done that, you’d be so much richer today.

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Guys & Calls …

I got the horse right here, the name is Paul Revere PDF Solutions.
And here’s the guy that says if the market’s clear,
Can do, can do. Lanza says this horse can do.
And if Lanza says this horse can do, you should too.
You should too.

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This entry was posted on Thursday, September 15th, 2016 at 12:55 pm. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.