If it’s getting more difficult to buy low and sell high because the stock market has done so well, investors who wish to speculate in stocks have only price momentum to help with their trades.
Individual stock-picking is difficult at the best of times and, no matter what, trades are perpetually at the whim of prevailing stock market sentiment. More often than not, however, the right story comes to the market at the right time with the right “package” that institutional investors are looking for. As individual investors, we always have to be watching and evaluating which micro-cap stocks large, institutional investors could invest in. As we all know, institutional investors are the only drivers of share prices.
One such new listing that’s a standout right now is Inphi Corporation (NASDAQ/IPHI). This stock came to the market at the right time and in an industry that’s experiencing a pronounced recovery in business conditions.
This small, but growing company is a fabless provider of high-speed analog semiconductors for the communications and computing markets. Inphi’s products provide an interface between analog signals and digital information in high-performance systems like telecommunications transport systems, networking equipment, enterprise and data center servers, storage platforms, and military systems. Its products are designed to address bandwidth bottlenecks in networks and the company has shipped over 100 million high-speed analog semiconductors to customers in a variety of industries.
Inphi recently completed an initial public offering (IPO), selling 6.8 million common shares at $12.00 per share. Morgan Stanley & Co., Deutsche Bank Securities and Jefferies & Company were the main book runners in the offering. Now the stock is trading around the $25.00 per share level. Not bad for just a few months’ work.
This is a domestic growth story that big investors have rallied around. The stock isn’t overly liquid, but it’s liquid enough for big investors to hold without getting worried. According to the company, its 2010 fourth-quarter revenues grew 20% to $21.1 million. GAAP net income was $3.0 million, or $0.11 per diluted share, compared to $2.7 million, or $0.03 per diluted share, in the fourth quarter of 2009. For the year, Inphi’s revenues grew to $83.2 million, representing growth of 41%. GAAP net income for 2010 was $26.1 million, or $0.61 per diluted share, compared to $7.3 million, or $0.05 per diluted share.
A lot of newly listed IPOs languish for months and months, because they come to market at the wrong time and they’re too expensive. Inphi and its bankers did a great job of pricing and timing everything just about right. Now this micro-cap stock has a lot of momentum and everyone is happy.
The best stock market advice I can give to individual investors who want to speculate in stocks is to always play what the market gives you. You can’t force the marketplace to help you. Understanding the market is meaningless. So, in a bear market rally, take a look at every new listing that comes to market. As Inphi proved, that’s where some of the best momentum trades take place.