Spruce Point Capital Management, LLC has released a research report about small cap robotics stock iRobot Corporation (NASDAQ: IRBT) entitled "About to Short Circuit," meaning investors should take a closer look at the report, the stock and the performance of robotics peer Adept Technology Inc (NASDAQ: ADEP) and the Robo-Stox Global Robotics & Automation ETF (NASDAQ: ROBO). I should mention that we used to have both Adept Technology and iRobot Corporation in our SmallCap Network Elite Opportunity (SCN EO) portfolio because we see the robotics subsector improving as companies aim to reduce overhead and improve efficiencies through machine to machine (M2M) automation.
What is iRobot Corporation?Founded in 1990 by Massachusetts Institute of Technology roboticists with the vision of making practical robots a reality, small cap iRobot Corporation employs more than 500 of the robotics industry's top professionals - including mechanical, electrical and software engineers and related support staff. iRobot Corporation's home robots help people find smarter ways to clean, its defense & security robots protect those in harm's way and its remote presence robots enable virtual presence from anywhere in the world. These consumer and military robots feature proprietary technologies incorporating advanced concepts in navigation, mobility, manipulation and artificial intelligence.
As for potential robotics performance benchmarks or peers, small cap Adept Technology is the largest US-based manufacturer of industrial robots whose intelligent automation product lines include industrial robots, configurable linear modules, machine controllers for robot mechanisms and other flexible automation equipment, machine vision, and systems and applications software while the Robo-Stox Global Robotics & Automation ETF tracks the ROBO-STOX™ Global Robotics and Automation Index, which is designed to measure the performance of robotics-related and/or automation-related companies, through 78 holdings.
What You Need to Know or Be Warned About iRobot CorporationTo begin with, Spruce Point Capital Management, LLC is a firm that "focuses on value and special situation investment opportunities" according to its website while the founder has the following posted as part of his biography:
Mr. Axler is the founder of Spruce Point Capital Management and co-founded Prescience Point Research Group, a short-focused research firm. Mr. Axler is an activist short-seller, forensic financial researcher, and has exposed over $1.0 billion of alleged frauds on the Nasdaq and the NYSE.
In other words, "About to Short Circuit" is just another hit piece from a short seller who will probably make money if the stock goes down (There is also an article on Seeking Alpha from the group with a rather long winded disclaimer that basically says we should assume they are shorting the stock).
With that said, the research report does raise what could be valid concerns for investors which are summarized below:
iRobot Is The Poster Boy For A Robotics Bubble. Covering Up Weakening Fundamentals and Growth Prospects. Signs of Aggressive Accounting. Insider Selling Intensifying Egregious Rigging of Incentive Compensation. IRBT + Analysts Incorrectly Position The Stock. Price Target: $20 -$25 per share >>>25% –40% DownsideHowever, I am not so sure what robotics bubble Spruce Point Capital Management is talking about because I can think of a number of other potential bubbles out there (e.g. 3D printing, housing, university tuition etc) that are bound to burn investors even more when they pop; nor what the fuss is about over incentive compensation (probably no more piggish than at other publicly traded companies).
The statement "Milking Shareholders For Bad Performance With Outrageous Cash Comp" seems rather harsh for a company that's trading three times higher than it was at the depths of the financial crisis:
Another statement, "Insider Ownership Down From 60% at IPO to Under 5% Today" is rather odd when you consider that the iRobot Corporation IPO occurred on November 9, 2005. The Yahoo! Finance Insiders Transactions page does list a bit of insider or institutional selling:
Net Share Purchase Activity
| |||||||||||||||||||
| Net Institutional Purchases - Prior Qtr to Latest Qtr | |||
| Net Shares Purchased (Sold) | (2,094,240) | ||
| % Change in Institutional Shares Held | (11.21%) | ||
But the Yahoo! Finance Major Holders page does show a wide range of institutions remaining as shareholders:
Breakdown
| % of Shares Held by All Insider and 5% Owners: | 5% |
| % of Shares Held by Institutional & Mutual Fund Owners: | 71% |
| % of Float Held by Institutional & Mutual Fund Owners: | 75% |
| Number of Institutions Holding Shares: | 151 |
Finally and as for aggressive accounting, I should also note that I wrote about the stock after its last earnings report (see: Small Cap Robotics Stock iRobot Corporation (IRBT): A Buy After an Earnings Dip? ADEP & ROBO) where I mentioned post earnings CEO interviews on CNBC and Bloomberg (aggressive accounting was not covered) that would seem to cast doubt on another statement: "Spruce Point Believes IRBT Is No Longer A Robotic Innovator."
Share Performance: iRobot Corporation vs ADEP & ROBOOn Tuesday and despite "About to Short Circuit" already being out there, small cap iRobot Corporation rose 3.37% to $31.88 (IRBT has a 52 week trading range of $28.90 to $48.36 a share) for a market cap of $939.82 million plus the stock is down 9.92% since the start of the year, down 7% over the past year and up 165% over the past five years. Here is a look at the long term performance chart for iRobot Corporation, Adept Technology and Robo-Stox Global Robotics & Automation ETF:
As you can see from the above chart, iRobot Corporation has been a pretty good performer (although its sort of leveled off in recent years) while Adept Technology made a big jump last year and the Robo-Stox Global Robotics & Automation ETF has not been around that long.
Finally, here are the latest technical charts for all three robotics stocks or ETFs:
The Bottom Line. Again, the research report "About to Short Circuit" does come from a firm run by a known short seller – meaning anything they say should be taken with a few grains of salt. Nevertheless, "About to Short Circuit" should be looked over by investors and traders alike who can then form their own opinion about the report's validity.
SmallCap Network Elite Opportunity (SCN EO) recently had open positions in IRBT and ADEP. To find out what other open positions SCN EO currently has, and to learn why so many traders and investors are relying on this premium subscription service, click here to find out more.
No comments:
Post a Comment