This Small Cap Could Double From Current Levels

by Sam Collins | October 21, 2013 1:28 am

Kulicke and Soffa Industries (KLIC[1]) — 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[2],” 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.

KLIC Chart
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Chart Key[3]

  1. KLIC:
  2. A Hidden Value in Semiconductor Equipment:
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