Tuesday represented the 52nd time year-to-date that the S&P 500 closed up or down more than 1%, which is my naïve and simple definition of a "volatile day". It also put the index into negative territory for the year, as 2018's version of the "tech wreck" is fraying investor's nerves.
After a period of relative calm between June 4th and October 9th, during which there was just one "volatile day" (June 25th), its been a different story since October 10th. In the 30 trading days since, the S&P 500 has experienced 16 volatile days, 8 positive and eight negative. The negatives have been more pronounced however, and the S&P is down about 8.3% during that time-frame. Buckle up for the remainder of the year; this will likely continue in my view, the oscillation between the up and down days which just might reveal some interesting bargains as the tax loss selling commences.
One of the more interesting stories in small value Tuesday, amid a sea of red was Kulicke and Soffa (KLIC) , which reported seemingly decent fourth quarter results prior to market open. KLIC beat the 31 cent consensus earnings estimate by 14 cents, while reporting in-line revenue. Pleased with these results, I was shocked to see KLIC getting hammered in pre-market trading, and then open down 12% at $17.50.
Sometimes markets hand investors momentary opportunities, in all of their inefficient glory, and this, while, fleeting, was one of them. The stock quickly recovered, and by about noon, was up nearly 30% from that open. KLIC ended the day up 7% (from Monday's close), not a bad day while the broad markets were having a rough session.
Cash-rich KLIC ended the quarter with $614 million or just over $9 per share in cash and short-term investments, and just $15 million in debt. The company is officially back in "double-net" territory, and trades at 1.97 X net current asset value. Consensus earnings estimates for next year put the forward price earnings ratio at about 10.5.
The company also continued buying back shares, and reduced shares outstanding by about 1.66 million during the quarter. KLIC also declared a 12 cent quarterly dividend, which it initiated over the summer. I typically like the combination of share buybacks, and rising dividends, and hope that KLIC will follow through on both. It certainly has the resources to do so.
KLIC remains a relatively cheap, cash-rich name with a great balance sheet, unencumbered by debt. This is the type of company that would make an interesting acquisition.
Market volatility and uncertainty may reveal more KLIC-like situations; that is what makes the roller-coaster ride bearable. There are still pockets of inefficiencies in the markets, and uncertainty tends to reveal these opportunities. You just have to have a keen eye, and strong stomach.
Happy Thanksgiving!
