Billionaire Ken Fisher Adds to Stake In Veeco Instruments

We can compare Veeco to Cree, Inc. (NASDAQ:CREE), Applied Materials, Inc. (NASDAQ:AMAT), Canon Inc. (NYSE:CAJ), and SanDisk Corporation (NASDAQ:SNDK). Of these companies, Cree is the only one with a forward earnings multiple greater than 20 (at 26) and, while that stock also has considerable short interest, revenue and earnings grew at double-digit rates last quarter versus a year earlier including a 69% increase in net income. The other three peers have forward P/Es in the 13-14 range, which represents a much more appealing pricing for a value investor at first glance. However, Applied Materials has been struggling recently with a 24% decline in revenue in its most recent quarter compared to the same period in the previous fiscal year, and in the case of it and SanDisk the forward earnings estimates are based on very high growth projections for the next couple years. As a result we think that Canon might be the best prospect for further study: its trailing P/E is 14 as well, business has been about flat, and the company pays a high dividend yield as well.

We don’t think that investors should be following Fisher in this case. Veeco’s business has been struggling, and the valuation seems high. While the company does have a sizable cash position and a turnaround is of course possible, we’d prefer to see much better value characteristics in a stock to recommend that investors do more research.

Disclosure: I own no shares of any stocks mentioned in this article.