Shares of RF chipmaker Qorvo (NASDAQ:QRVO) gained 14.6% in May 2017, according to data from S&P Global Market Intelligence.
Qorvo's fourth-quarter report, released on May 3, had very little effect on the company's stock prices the next day. Instead, the gains started when noted value investor Seth Klarman's Baupost Group disclosed its acquisition of 7.2 million Qorvo shares, creating a 5.7% ownership stake in the company. Share prices rose more than 6% the next day.
A successful analyst day followed, complete with a flood of follow-up analyst upgrades and raised price targets. And Qorvo's share prices quietly continued to climb.
It's hard to bet against an investing genius of Klarman's caliber, but the wireless-radio technologist is still walking a fine line between success and disaster. The company relies on a small number of very large customers, with three customers accounting for 52% of Qorvo's total sales last year. If one of these smartphone titans were to take its RF chip business elsewhere for the next serving of mobile flagship and high-volume phones, the top and bottom lines would instantly suffer some harsh burns.
That being said, the company that was born in the merger of high-quality RF makers TriQuint and RF Micro Devices can show solid revenue growth and stable cash flows across its brief history. Qorvo is also staffed with top-quality management material, and has long-standing histories with all of the oversized clients mentioned above.
All things considered, I see more reward than risk in owning Qorvo shares at current prices. Not that Klarman needs my nod of approval or anything, but he's getting one regardless.