Keep Your Eyes on the Road, and Your Hands Upon the the Steering Wheel

by Martin Dekom

Just so everyone knows, that doo-dad on the left side of the steering wheel is the turn signal indicator; colloquially known as the blinker. By manipulating it vertically, one can actually indicate to other drivers which way one is turning. This may seem obvious to you, being reasonably intelligent and fairly affluent.

However, my research in the field shows that this fundamental of collision avoidance has been lost on the masses of drivers who infest the area between my office and home.

It's a jungle out there!

My current project is to see if I can apply this principle to stocks, and somehow attach a blinker to those equities with changing prices. Perhaps if I spot an upward trend soon enough I could put on the left turn signal to indicate that the graph is moving towards the top of the page, along with an appropriate sound effect: dinka...dinka...dinka... This may be the case with Cohu (NASDAQ: COHU), a maker of high tech gizmos and other electronic widgets. Who cares what they make if the turn signal is on?!

Well, before jumping to conclusions, let me recount a recent Cohu story.

Cohu's price had bottomed in the low 20's and had crept up towards 25 when they announced their earnings. They are doing very well, this being reflected in the bottom line, so the stock shot up to 36; a 40% gain. However, since mid-February the turn signal was down and the stock is now in the vicinity of 26-27. The next earnings report is due April 19.


I believe this stock is undervalued at current levels, and that by buying the stock and/or selling the options (the May 30 calls sell for 1 3/8), one could reasonably expect a net gain of 6-10% within 6 months.

For those who read the fine print, be apprised that this is an aid to your due diligence, not a substitute, and represents only the opinion of Martin Dekom.

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