Why Alliance Fiber Optic Products, Inc Shares Tumbled Today

Is Alliance Fiber Optic Products' drop meaningful? Or just another movement?

May 30, 2014 at 7:52PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Alliance Fiber Optic Products (NASDAQ:AFOP) fell nearly 10% Friday following a 10-session win streak and news of an insider sale.

So what: Helped by its solid first-quarter results, shares of Alliance Fiber Optic have been on a tear, having risen 35% year-to-date even after today's drop. As of yesterday's close, that included gains in each of its past 10 trading sessions, for a total gain of 22%. But investors were prompted to take some of those profits off the table after an SEC filing yesterday revealed Alliance Fiber Optic Products CEO Peter Chang sold a total of 203,332 shares between Tuesday and Wednesday at a price of roughly $21.06 per share.

Now what: The purpose of this sale is unclear, but note that Chang also sold 200,000 shares earlier this month through a 10b5-1 plan for the benefit of The Peter & Mary Chang Foundation, which he and his wife founded "to make donations to organizations for religious, charitable, scientific, or educational purposes." Chang still owned roughly 1.475 million shares following this week's transactions.

In the end, I can't blame the market for taking a step back today, but I also don't see any compelling reason to sell the stock, with shares currently trading at a reasonable 15 times next year's expected earnings.

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Steve Symington has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Jun 12, 2015 at 5:01PM

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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