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Market Call: Stephen Takacsy discusses Baylin Tech

Stephen Takacsy, president, CEO and chief investment officer at Lester Asset Management, discusses Baylin Tech.

Host: I’m not hearing J.C. Baylin Technologies was the question.

Stephen: Right, so we’ve talked about Baylin before. The stock has gotten hammered since the company stumbled a little bit on its quarterly results. They warned that revenues and earnings would be down in Q3 and Q4 and it’s almost entirely because of AT&T and Sprint Mobile merger — or non merger — that’s going on in the U.S. where they’ve delayed some of the CapEx spending on the 5G networks and so on.

Other than that, business is booming, and, in fact, in the same press release as the earnings warning, Baylin announced its biggest contract ever. They’re building an entire new plant in Vietnam just to service one of the world’s biggest telecom companies. We don’t know if it’s Nokia or Ericsson or Samsung — but it’s probably one of those three — who have basically signed agreements with dozens and dozens of the world’s telecom players. So, Baylin will be indirectly supplying mostly Europe and Asia. And people are totally overlooking that.

So, right now, it’s suffering from tax-loss selling. People don’t understand there’s a much, much bigger prize coming down the road here.

Host: Apart from tax loss selling why do you think the stock is down, though.

Stephen: Well, because they made an earnings warning.

Host: Oh, I see.

Stephen: Well because they made an earnings warning, back, I think it was in September, October that Q3 and Q4 would be lower than expected, but its mostly because of those U.S. Telecom players, who were just postponing some of their capital spending until next year. But, otherwise, they’re firing on all cylinders in terms of the embedded antennas, the microcell deployments in terms of network densification, wifi and so on. So, its just on the 5G side, these things take a little bit longer than you anticipate. And, the market has no patience, unfortunately. There’s a lot of computer trading going on, momentum trading… and algorithms, and often that’s what starts throwing a lot of stocks into the highly volatile zone — but that becomes a buying opportunity for long-term, more patient investors.

 

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