Believe it or not, I do own stock that isn’t MVIS. MicroVision (MVIS) is a good story, but they don’t have much relevant financial data. GigOptix, that partly embodies a spinoff from MicroVision called Lumera, has better data, reported it, and surprised me with good news. The market decided to ignore all of that and move a completely different stock, AMSC, that had no news and no new data. Investing, logical in the long run, chaotic in the meantime.

Companies buy companies, and an event that gets labeled as a Merger or Acquisition, can really be a takeover or a cheap way to buy talent or patents.

Back about 2007, MicroVision needed some cash and didn’t want to go into debt. They had two main sets of product lines: image capture and projection based on a mirror on a chip, and an incredible suite of products based on a fancy organic material. MicroVision emphasized the Vision part of their name, kept the image based technology, and spun off the rest into Lumera. The short version is that Lumera never succeeded and eventually became part of GigOptix, a high tech electro-optical switching company. I think it was a merger, but more like a takeover. The longer version is in a previous post (UW MVIS LMRA GGOX GIG). MicroVision sold their LMRA shares. I kept mine, which are now GIG.

Tech takes time, and after all of these years, Lumera’s tech within GigOptix’s product line is finally making money. In recent years, GigOptix has grown to making about $30,000,000 in annual revenue, only some of which is from Lumera tech. GIG’s market cap isn’t much more than that. Price to Sales is about one. MicroVision is making about $6,000,000 and has a market cap about twice GigOptix’s. Just based on MVIS’s valuation, GIG’s valuation should be about ten times MVIS’s (5 times higher revenue and 2 times the P/S.)

One reason for MVIS’s higher valuation may be MicroVision’s potential, which I’ve described numerous times (Semi Annual Exercise Mid 2014, Abnormal And Extraordinary Surprises).

High tech companies like GigOptix are harder for analysts to understand. Who cares whether they make a better 60 GHz switch or are one of the few that can make a 70 GHz switch? Evidently enough tech folks care that the company made tens of millions of dollars. GigOptix’s story is similar to f5’s (FFIV). Few analysts understood the technical details, but the technicians appreciated the product and stock that traded at $3 now trades over $100 because eventually they made a lot of money. There’s that benefit of long term investing.

GigOptix’s revenues have been uneven. Analysts like steady growth. Any appearance of chaos is not appreciated. Here was the good news. GigOptix reported 18% revenue growth. Good. They also reported the growth in two other sectors. They were small sectors but the one roughly doubled and the other roughly tripled. I believe those sectors incorporate Lumera’s technology. Very nice.

With news like that, and some nice after hours market action, I expected GIG to rise nicely the next day. As I got up and did my regular check to see if MVIS’s surprise positive announcement happened, I saw that my portfolio was up nicely. It wasn’t because of MVIS. And it wasn’t because of GIG. My portfolio was up because of AMSC. Even the message boards were wondering about the move.

All three stocks have good reason to grow. GIG’s reasons were most current, but the data trend isn’t long enough and the company is small enough that the stock remains overlooked. MVIS’s reasons are based on speculation that good news is about to be announced – any day now – for the last few years. AMSC’s reasons are varied, with one dramatic catalyst being progress in an intellectual property dispute in the Chinese courts. But there wasn’t news there, or from sales; and yet the stock moved.

My investing philosophy has long been Long Term Buy and Hold, and that strategy has been tested in the last few years. The long term has been taking too long. And yet, the fundamental logic of the strategy remains valid, progress is being made (even though it may be overlooked), and my best tactic is to stand still and hold as long as I think the story hasn’t changed significantly. Standing still long enough for persistence to pay can take a lot of work.

Headaches happen when the brain tries to force one world view (the ideal of the long term) onto another world view (the reality of now). I’ve been investing long enough that the incongruity is familiar. I’ve also been investing long enough to know that as much as a stock can be unreasonably discounted for a long time, it can also be granted an unreasonable premium for a long time. The transition from one to the other is fascinating and fun to experience. It apparently didn’t happen for GIG or MVIS that day. Maybe it is beginning to happen for AMSC.

The news was here, for GIG. The movement was over there, at AMSC. I think and hope that the real movement will be then, sometime soon; after which, headaches may no longer be an issue.