CompoundSemi Online - The Original Compound Semiconductor Industry Newspaper

June 10, 2008...Lacking a better barometric tool, the CS Model Portfolio of ten compound semi (CS) industry publicly-held companies traded on the USA's Nasdaq stock exchange reveals that Anadigics and Aixtron currently ranks as the big winners since beginning this project in '05. At the bottom of the big ten CS rankings are JDS Uniphase, RF MicroDevices, and Kopin. For facts, figures, opinion and a personal perspective on it all, read on in this week's McDonald Report.

For those of you who weren't around compound semi circles in 2005, that was when I began my retirement phase as a tradepress journalist and established the CS Model Portfolio. Worse case, it would give me something to write about in quiet times, like now. Best case, I might make a few extra pennies off the stocks in the longrun. For sure I'd help provide outsiders with an insider's view of the CS industry.

Let the record show that from April through July of 2005, I had my broker purchase the basic minimum of 100 shares each of my pick of the publicly held companies that were available for trade in 2005. Whereas journalists can't (or at least shouldn't) purchase stock in the companies they cover, I learned that "commentators" can, providing they disclose what they own, which I do via these periodic portfolio updates. As founding editor of CompoundSemi News, and leaving that duty now to our intrepid news editor, Scott McMahan, I now restrict my activities to "commentary" and this is merely a "model portfolio," although I wouldn't mind if it actually helped supplement my social security and Medicare in my really advanced years. Hopefully the total investment will at least earn me enough to pay for rising fuel costs. (Too bad the whole world doesn't run on CS solar and CS advanced LEDs!)

The CS Model Portfolio currently includes (in alphabetical order, followed by its Nasdaq trading symbol): Aixtron (AIXG) Anadigics (ANAD), AXT (AXTI), Cree (CREE), Emcore (EMKR), JDS Uniphase (JDSU), Kopin (KOPN), RF MicroDevices (RFMD), Spire (SPIR), and TriQuint Semiconductor (TQNT). The portfolio has always contained about ten to twelve stocks that I believe represent the "most likely to succeed" and "hang in there for the long term" category of our industry's publicly held players. Most of the companies confine their activities to CS-based material, equipment and/or device work, the standout exceptions being Spire and Kopin, which dabble outside our industry for bread and butter product lines. But both those companies are so deeply rooted in helping pioneer the CS industry and introducing it to the outside world that they simply have to be included. What would an industry be without Spire's Roger Little and Kopin's colorful John Fan?

While some of the original and subsequent portfolio companies have fallen by the wayside over the last three years, and were thus eliminated from the portfolio (with proper 30 day notice to readers), and whereby Color Kinetics and TIR Systems were acquired by Philips and WJ Communications acquired by TriQuint, etc... the portfolio now includes ten companies that I have confidence will make it over the long haul. They may not make it big, but they'll undoubtedly survive, whatever fickle politicians and the world's events throw our way. For sure they've contributed significantly to the industry's overall rise and continued success. We may not be as pervasive as silicon, but we're an extremely important industry. The old adage prevails: If you can't do your design in silicon, you have no choice but to turn to the compounds. And keep in mind these ten companies have all been around for over twenty years now and know their various flavors of compound semi technology. They will likely continue to evolve as they grow, or be acquired as they shrink, but I feel confident their overall noteworthy performance will continue to be representative of the CS industry as a whole.

Here's how each company ranks when it comes to everyone's bottom line... long-term gain or loss in dollar value: ...

Anadigics was the big winner as of yesterday. At a purchase price for 100 shares of ANAD stock for $157, those 100 shares are now worth what I feel is an impressive $1,141.00, and Anad probably did it by sticking to its original device charter. Aixtron is in the second slot and continuing to steadily do well, probably due to also sticking with its original charter of providing the universe with MOCVD reactors. I purchased the AIXG stock for $368.95 and it's now worth $1,141.00. Thanks, Aixtron and Anadigics! I'm impressed and very pleased, and you should be too. In third place is Spire. Cost of 100 shares in '05 was $449.95 and although it's been higher over the three years, my Spire stock is now worth $884.05. Emcore weighs in at forth with a cost of $363.00 and that's now worth just $427.00. Not much of a rise for Emcore, which makes me ask: What's happening at Emcore? Change of guard worrying investors? Ramifications of splitting into two companies confusing? Two many flavors of competing CS solar coming on the market? Telecom apps pulling it down? Although it's changed its charter significantly over the last three years, it's a strong company and I'm sure it will continue to provide editorial fodder for this column space in the years ahead. AXT is in fifth place, the original stock purchase price being $129.95, and those 100 shares are now worth $356.00. After a masterful rebuild into mainland China, AXT's continued success is undoubtedly due to its outstanding leadership. I truly believe that AXT will emerge as a super winner in the longrun and besides, I always feel more confident when the climb is gradual (which often equates to sensible).

In sixth place after three years is TriQuint. Having purchased the 100 shares of TQNT stock at $337.00, that stock is now worth $641. In seventh place is Cree. My CREE stock was the most costly, and was a clear stretch for my risk-adverse pocketbook. But how can you have a portfolio without Cree. I love Cree! The three key founders are still there, they've always been extremely supportive of our events and helped us launch our most excellent BLUE event, and I have so many friends among their numbers it would be absurd to not include them just because the buy-in of 100 shares on 4/28/05 totaled (Gulp!) a whopping $2,427.00! Note to Cree: do not disappoint me!!!) After some ups and downs over the three years (mostly ups), that package is now up a mere $60.

Then we have three companies in the cellar as of this writing. JDS Uniphase is down $12.28, RF Micro Devices is down $121.95 and in last place, Kopin is down $132.95. So when you do the math, the bottom line is that, after three years of holding tight, I've made an (unrealized) gain of $4,373.12 by originally investing a total of $5,354.70, which was essentially my budget limit at the time. Since over the three subsequent years "times" have been tough, I'm often tempted to cash in, but I won't. I have confidence that sum will increase over the next two or so years and when I'm really old and feeble, that it'll buy something nice and comforting to remember the CS industry by. Something in CS solar heating and solid state lighting perhaps.

Interestingly... and I doubt it has anything to do with their performance (but hey, you never know), I've been especially close to the seven companies that are in the highest slots, and not so close to the three that are in the minus column. What I'm sure of when looking back over the last three years involved with this project, is that putting together the portfolio and writing about it over the years has been fun as well as interesting and enlightening. I looked at this as my grand experiment in gambling, but at the heart of it was faith they'd succeed, and hopefully thrive. I've obviously not been in this for the monetary return, but more for the editorial fodder. I hope you've enjoyed reading about the progress of these great companies over the years as much as I have enjoyed following and championing them.

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