This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Avago-LSI deal boosts Crabtree Technology portfolio

By John Spence


Crabtree Technology portfolio manager Barry Randall on Monday was rewarded for his decision to stick with holding LSI Corp. (LSI) after the stock rallied nearly 40% on news the storage and networking firm plans to be acquired by Avago Technologies (AVGO).

The $6.6 billion all-cash acquisition in the semiconductor sector was announced before the market opened Monday, and values LSI at $11.15 a share.

LSI Chart

LSI data by YCharts

"Investors like the deal," Randall said. "It makes sense for Avago, which is strong in its main wireless business. It has some exposure to storage but not much, which is where LSI comes in. So Avago diversifies away from dependence on one sector. The deal is immediately accretive to Avago, and both stocks are up today, which you don't really see often."

Avago shares climbed about 9% in afternoon trading Monday.

Randall expects the acquisition to be approved by shareholders at both companies.

"The deal is easy for everyone to swallow," the portfolio manager said. "The acquisition values LSI at about 15 times forward earnings, which is above the 12 times average but is not a stratospheric valuation by any means. Avago gets a nice division, and LSI shareholders get a nice premium. LSI may have shopped itself around when it got wind of Avago's interest, but both boards have agreed to the deal, so it doesn't look hostile in any way. Everyone is happy."

Randall first started buying LSI shares in May 2012 at just under $7 and has held the stock in Crabtree Technology portfolio since them. The company started showing up in his quantitative screens as early as 2011 because LSI generated solid cash flow and was increasing market share.

"LSI hits its quarterly numbers and rarely disappoints," Randall said.

However, he added the stock hasn't been a standout performer in his portfolio the past year. LSI shares were up about 16% for the trailing 12 months before Monday's big rally on the Avago acquisition news. Crabtree Technology portfolio is up nearly 44% over the past year after fees.

LSI shares underperformed the rest of Randall's model the last year, but sticking with the stock has paid off.

"Companies in the portfolio being acquired doesn't happen every day, but it is nice when it happens," Randall said Monday, adding he will likely sell LSI prior to the deal's expected closure, as is his habit.

The Crabtree Technology portfolio also currently owns LSI's primary competitor in semiconductors for storage applications, Marvell Technology (MRVL).

Photo Credit:

DISCLAIMER: The investments discussed are held in client accounts as of November 30, 2013. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable. Past performance is no guarantee of future results.
Barry Randall

Barry Randall

Crabtree Asset Management invests in growing technology companies. Barry Randall is the firm's founder and Chief Investment Officer. He has

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $93.64 -0.11%
FB $118.57 0.84%
GOOG $698.21 0.75%
TSLA $241.80 0.43%
YHOO $36.53 -0.19%


Chart of I:DJI
DOW 17,891.16 +117.52 0.66%
S&P 500 2,081.43 +16.13 0.78%
NASDAQ 4,817.5940 +42.2360 0.88%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs