Peter Lynch Wouldn't Touch These Value Destroyers

As I cast my eyes out over the thousands of public companies in America, I come upon a business like RF Micro Devices (Nasdaq: RFMD  ) . Or Tower Semiconductor (Nasdaq: TSEM  ) . Or Conexant Systems (Nasdaq: CNXT  ) . And I ask myself -- should I recommend them in our Motley Fool Stock Advisor service?

Should you buy them?

They all operate in the broader semiconductor industry. All have seen their stocks decimated over the past 10 years. None of them have created any value for their shareholders in the public markets. In fact, in aggregate, they've lost a lot of people a lot of money. But I'm not here to pick on them or to obsess over the past. While I think that these companies -- like many other businesses in America -- should never have gone public, that doesn't mean they can't fight to create permanent value for their shareholders from here.

And so let me make a recommendation, in the Peter-Lynch vein. Namely, that these companies go back to the drawing board and spell out very simply and very clearly to prospective shareholders how their business works, how their product line is differentiated, and how profoundly concerned they are with treating their shareholders like partners ... like members of their family.

Peter Lynch said that shareholders ought to be able to draw with a crayon exactly what a business does. Further, they should be able to explain the business clearly in 60 seconds or less. And if they can't, they shouldn't buy. I'm not saying that this is the only challenge that faces these three companies. But I do have a feeling that 99% of the marketplace doesn't understand their technology, doesn't understand their business, and shouldn't own their stocks.

Perhaps if they answered to this challenge, they might find greater alignment between customers, employees, and shareholders. And the next decade or two might bring value creation.

Fool co-founder Tom Gardner does not own shares of any companies mentioned. The Motley Fool has a disclosure policy.


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  • Report this Comment On July 26, 2010, at 2:24 PM, plange01 wrote:

    buffett said he would never buy stocks outside the US or derivitives! guess what!lynch retired for a good reason he could not handle the markets of today...

  • Report this Comment On August 09, 2010, at 6:57 PM, jpjjp wrote:

    Now I am convinced. Buy this stock!!

    This is also what the fools said on CROX when it was traiding 1$

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