Photon Control (PHO.TO)

This is a Burnaby based company. He likes the fundamentals, but has yet to pull the trigger. This is a small company and you should recognize it will be volatile.

e looked carefully at it but it got away from him. It is related to the semiconductor industry. There is cyclicality to it. It is hard to understand what they do. You want to buy when the multiple is cheap. It is a great turnaround story. They generated good growth. Sales can be lumpy. It is richly valued and he would trim at this level.

(A Top Pick Aug 2/18, Up 66%) A year ago this company looked a lot messier. They are hitting record backlogs and revenues. The higher valuation is justified by growth.

They make devices that measure the temperatures of the leading semi-conductor chips. The market concern is that they are providing to a cyclical industry--but there's clear sailing for the next two years in this space. PHO boasts a very high ROE. Trading at 22x earnings. Expects 30% growth this year.

They make test equipment for high-tech industries, such as semiconductors. The company is small, well-run, with good margins. They made management changes recently and cleaned up the Board. He thinks this might be a good time to get into it.

(A Top Pick June 6/17 Up 26%). The balance sheet is good and growth is good. He actually expected a better return. They focus on one of the 40 processes to create semi-conductors.

They meet his criteria in terms of consistent high returns on equity. This would be a smaller company. It should not be a large percentage of a portfolio. A good little company to own.

Once owned it. Good management in place who are generating a lot of cash. Depending on where we are in the semi-conductor cycle (they test semis), the stock may continue to move. He actively follows it.

(A Top Pick May 25/17 Up 30%). It is very cheap and good value. They beat expectations on recent earnings and are reducing backlogs and the balance sheet looks great.

He is following it, has met with management, and is not ready to invest in it yet. They have a good growth profile, good margins. They are dependent on a small number of customers but this is typical of the semiconductor industry. There’s a new CEO in place who is doing a great job of growing the business. He would only buy this company if it comes back down to a lower business. The price now reflects its improved situation. He suggests waiting to buy on weakness if you don’t already have it, but hold if you own it.

Their balance sheet could make them attractive to a bigger company. He still likes it. They recently sold a small business line. Their new CEO is positioning their company for more growth. He likes it.

He is meeting with them next week. He started looking at it last fall. They cleaned up things quickly last fall and built a new facility. He does not completely understand the business. They have a lot of customer concentration. They have new management in place. There are a few analysts starting to follow it.

A relatively small company based in BC. Not very familiar with their business line, but it has come through his screen and is a company that he keeps his eye on. If they can keep on executing their business plan, and continuing to generate high returns on equity, there is absolutely no reason the stock can't move higher. Being a relatively small company, you shouldn't have a large position.

It jumped on his radar a year ago and he went through it closely. He can’t understand what is happening with the suing between management and so on and it set off a whole lot of red flags. They have a decent underlying business but there was too much infighting. There is the momentum trade if you hold a small amount.

(Market Call Minute.) Earnings are going from $.05-$.11 in 2018. A huge free cash flow generator and a huge ROE generator. High cash on hand. New management. Thinks there is great opportunity for the stock to go higher.