Lee Hobson’s Highside Capital purchased 3.1 million shares of processor architecture designer MIPS Technologies on January 26th, the day after the company reported disappointing results. The shares plunged 12.9% on January 26th, in heavy trading. More than 11 million shares changed hands that day, 3.1 million of which were bought by Lee Hobson. It’s clear that if Hobson was’t buying, the decline would have been much worse.
Investors in this company were hoping the company’s mobile chip design could steal some market share from ARM Holdings (ARMH) in the smartphone and tablet market. MIPS gained around 300% during the past year as investors bet that the company would benefit from the smartphone and tablet boom.
Lee Hobson presented at the 2009 Ira Sohn Conference and his recommendations were right on target. However, there are a lot of pessimistic investors and 11 million shares of MIPS sold short. On top of that, the company’s President and CEO, Sandeep Vij, adopted a 10b5-1 plan at the end of November in order to freely dump his stock holdings. It’s clear that the stock is richly valued with a price-to-sales ratio of 8. Insider Monkey, your source for free insider trading data, isn’t as well-connected as Raj Rajaratnam but Sandeep Vij’s recent transactions made us a bit cautious about investing in MIPS.