Why Alliance Fiber Optic Products, Inc Shares Tumbled Today

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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  • Report this Comment On May 31, 2014, at 7:13 PM, docmtc50 wrote:

    As you say, we ought not try to time the market.

    That said, I've had AFOP on my radar for a while. When I saw the drop going on Friday, my nose set to the grinding wheel, my eyes were on the ball and my ears searched for any rumblings I could perceive. (Now... You try to work like that!)

    Anyway, I managed to strike at ~ $20.40. Bought a couple hundred shares at close to the day's low. I searched and searched but, as you suggested, the purpose of the sales completely evaded me.

    Best I could tell, Mr. Chang sold a total of about 460,000 shares total through May 2014. Previous to that, it seems the last time he sold any was September 2013.

    I figured, since the company is on a tear earnings wise, I guess the Chairman/CEO is entitled to cash in on some of his profits. I saw the drop as an opportunity to get into a stock that I believe has a long way to go. Their guidance is strong and the analysts are virtually all positive.

    I'll consider this a positive addition to my portfolio and will remain so until time may prove me otherwise.

  • Report this Comment On June 13, 2014, at 10:38 AM, EnigmaDude wrote:

    Good day to add more shares with the share price down below $20 again (temporarily).

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