High-tech speculation
Dear Mr. Berko:
Last February, my broker bought 300 shares of Universal Display at $35.45. Though this $10,000 investment represents only a tiny portion of my account, I’m uncomfortable with it because it’s one of those darn tech stocks that I promised I’d never own again. I called my broker and told him to sell it, but he convinced me to wait a few months. Now I have an unexpectedly huge profit. I’m also nervous because I don’t want to lose that profit, and my broker wants me to continue to hold the stock. Should I hold my position or take a profit? I don’t understand what this company does or why I should own a company that has no earnings, less than $30 million in sales and sells at a ridiculous $50 per share.
J.L., Oklahoma City
Dear J.L.:
Universal Display Corp. (PANL-$52.92) is a high-tech company, and frankly, I don’t understand high-tech stuff, which may be obvious from some columns I’ve written over the years. I don’t understand things that sit there like a boulder, get warm, then hum, buzz, blink and glow like a rainbow.
But I understand PANL enough to tell you it’s involved in the research, development and commercialization of organic light-emitting device (OLED) technologies and related materials. And I know that future applications for organic light-emitting technology are boundless.
PANL licenses its organic technologies to manufacturers of products with display applications such as cellphones, laptops, flat-screen TVs, weapons and military systems, portable media and entertainment devices and the lighting industry. As of this week, PANL has 1,093 patents issued and pending.
In the trailing 12 months, the company posted revenues of less than $30 million and a loss of about 51 cents per share. As long as I’ve known PANL, it hasn’t earned a dime or a drachma.
Operating margins are minus 54 percent, return on equity is a negative 33 percent and operating cash flow dances in negative territory. How can a company with bupkes in revenues have a market cap of $2 billion? How can a company with zero earnings trade at $50 per share?
But last March, Goldman Sachs, UBS, Oppenheimer, etc., led a secondary offering of 5.75 million shares at $46 per share, netting $249 million. Go figure!
Now, I don’t know “boo” about PANL, and I know even less than boo about the OLED business. But one of the most brilliant money managers I know has convinced me that PANL has the earnings potential to trade at $700 to $900 per share. Either Goldman Sachs, etc., are uncommonly bullish or incredibly stupid to monkey with a dinky $250 million underwriting for a company whose 2011 revenues in hundred-dollar bills would weigh less than 50 pounds and earnings that wouldn’t fill a teacup.
Well, Goldman isn’t stupid; rather, they’re fairly keen folks. Like the money manager who began telling me about PANL a few years ago when it was $11, Goldman and friends have a very positive view of PANL and its OLED technology.
It ain’t a stock for widows, children of widows or orphans, but there are likely to be interesting times ahead.
Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or email him at malber@adelphia.net. ©2011 Creators.com
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