RE: Goose is on the move.17 Jul 2019 00:25
Interesting quote from Herald Investment management 2018 yearly report.
'11Herald Investment Trust plcAnnual report & financial statements 2018There has been a wide divergence in performance between stocks. A few have disappointed at the trading level, while others have just been de-rated. The subset of the technology sector that has experienced downgrades has mainly been exposed to volume markets, such as mobile phones and automotive. This has hit the semiconductor sector in particular where increases in capacity combined with lower growth in demand have led to price cuts and margin pressure. This has affected holdings such as IQE and BE Semiconductor Industries, both of which performed outstandingly in previous years. We had reduced our positions, but not enough. However, the appeal of the sector is that it is not homogeneous, and in all markets, there are some that grow. For most of our holdings there has been no discernible weakness versus expectations.'
Further quote.
'UKThe UK portfolio declined 8.7% on a total return basis. The two worst performing stocks were IQE and Bango, which last year were the best. In 2017 IQE appreciated £29.8m and in 2018 it declined £11.5m. Fortunately, we had been aggressively taking profits on rising prices so that during 2017 we had realised cash of £19.2m and profits of £15.3m, and a further £5.1m of cash and £3.8m of profit in the first quarter of 2018 in 27 separate trades, albeit offset by an investment of £2.9m to support the fundraising to ensure they could invest in additional capital equipment for demand expected from Apple. The level of expected demand from Apple has reduced, however, and so has IQE’s share price. The business remains the world leader in manufacturing compound semiconductor wafers, and now has a strong balance sheet. These wafers will be used in the forthcoming 5G phones and infrastructure,
and we expect the demand for VCSELs, which are used in the iPhone’s facial recognition product, to grow albeit at a slower rate now that Apple has demonstrated that the market for £1,000 smartphones is more limited than hoped. As a user I am a convert to the belief that facial recognition will be more widely adopted, but the overall phone price must lower, and it will do so as component prices such as DRAM fall. As an investor focussed on smaller companies in the supply chain of large companies such as Apple, it is evident that it is brutally tough in requiring the supply chain to build capacity in excess of any potential demand, and then subsequently has the whip hand on pricing. '
Looks like they provided 2.9m of the 90m fund raise IQE did. They are down 11.49m in 2018 on IQE. So production increased on a shrinking market.
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