However I tend to follow a buy-and-hold strategy, I try not to follow Mr. Markets irrational market behavior. Around 2 weeks ago, my shares in Melexis surged pretty high. They had already been going higher the last months, but due to the results they presented, they went pretty damn high. I sold the entire stake.
Why? Melexis is a Belgian based company which manufactures semi-conductors, sensors and smart systems, mostly for the car industry. I do think this business will appreciate over time because of the growing smart components in cars but I wasn’t convinced the share price reflected both current and future prospects.
Over 1.5 year, I made a profit of around 80% (dividends included) from the position. When I first bought them, they were trading around P/E 18. This seemed acceptable for the growing company. Nowadays they trade around a forward P/E of 30. Fact is, they are extremely vulnerable to the car industry. Remember the Volkswagen scandal, the slowing down Chinese demand and all of that? The stock took hits back then. However Melexis is a profitable company with a good looking future, I didn’t feel comfortable anymore holding the stock any longer at those levels. All analyst reports have one thing in common: way too expecting. They expect everything to go higher, profits, margins, demand, industry… The market is greedy. When sales slow a bit down or bad news comes in, I expect the shares to plunge.
Because I still like the company itself, I’m waiting for a correction in share price before I would initiate a position again. The sale added €4,500 to my cash reserves, which are around €15,000 right now. I’ll just sit on my cash or do short-term option writing.