Kulicke and Soffa Industries (KLIC) — This small-cap manufacturer of capital equipment and expendable tools used to assemble semiconductor devices was highlighted in Barron’s last week. The article, “A Hidden Value in Semiconductor Equipment,” said KLIC “looks like an activist’s dream” because of its high cash position and the “cheap” stock price.
Analysts’ consensus estimates are for earnings per share (EPS) of $0.81 in fiscal 2013, ended in September, and $1.33 in fiscal 2014. It is trading at just 10 times next year’s earnings in an industry that is averaging about 14 times earnings. Thus, on a fundamental basis, KLIC appears to be worth about $18 a share.
Technically, the pop from $12 left a gap from $12.14 to $12.62. Breakaway gaps are usually not closed by profit-taking, and so a partial position in KLIC could be taken now, and if the stock pulls back to $12.20 or lower, a full position could be executed.
If this breakout picks up additional volume and follows through, the stock could easily trade to $17. Longer term, KLIC could double from its current level.