Synaptics Incorporated (NASDAQ: SYNA) Q2 2011 Price Target

Recent price: 25.14$

P/E Ratio: 13.71

3 Months Target Price: 32$

Company Description

According to data provided by Reuters, Synaptics Incorporated is a worldwide developer and supplier of custom-designed user interface solutions that enable people to interact and intuitively with a variety of mobile computing, communications, entertainment and other electronic devices. The Company targets the personal computer (PC) market and the market for digital lifestyle products, including mobile smartphones and feature phones, portable digital music and video players, and other select electronic device markets with its customized human interface solutions. Its original equipment manufacturer (OEM) customers include tier one PC OEMs. The Company supplies custom designed human interface solutions to its OEM customers through their contract manufacturers.

Confidence Margins

Strong resistance $33.33 (+33%)

Light resistance $32.24 (+28%)

Light support $23.82 (-5%)

Strong support $21 (-16%)

Recommendation

This company has been trading down on a continued selling pressure since issuing quarterly statements en January 20th. Synaptics Incorporated saw more than it's fair share of analyst downgrades since then. The company presents good value at these levels, and it will be interesting to acquire a position and hold it for the coming quarter.

Entry strategy

For the cautious investor:

Buy the stock for 26$ or less.

For the risk-taking trader:

The September 2011 26$ out-of-the-money call option contract seems to be the right position to take, they can be acquired for about 275$ per contract.

Exit Strategy

For the cautious investor:

Sell when the stock reaches 32$. It is highly recommended to keep the position on check if it goes sour.

For the risk-taking trader:

The contracts should be kept until the underlying reaches around 32$. This should provide a satisfactory return if the underlying reaches the target price as the contracts will get in the money.

The One Good Reason Why David Sokol Is Clean (NYSE: BRK; LZ)

Even if it is widely discussed that the former Berkshire Hathaway (NYSE BRK.A, BRK.B) executive David Sokol acted in an unethical manner in the Lubrizol Corporation (NYSE: LZ) deal, people seem to forget one important matter.

A lot of the buzz is generated by the fact that Sokol took his position after that meeting with investment bankers at Citigroup on December 13th 2010. those who are in such a ruch to throw accusations at Sokol seemed to miss that there were 18 companies proposed to David Sokol on that day.

Even if he acknowledged that Lubrizol was the most interesting company out of that list. There is no way he could have known in advance which of those 18 companies Berkshire Hathaway's Chairman Warren Buffet would come to chose in the end. It is also interesting to note that Buffet was pretty cold about buying Lubrizol until near the end of January 2011.

A way to know that Sokol acted in a way to profit from an acquisition by Berkshire Hathaway would have been for him to buy all of the 18 companies. One must remember that before the acquisition, as he said in an interview on CNBC, David Sokol purchased those Lubrizol stocks for his own account because he thought that the company had a good long term potential. He also mentioned that he trades pretty rarely. That is also the same reason why he was pressing for a deal between Berkshire Hathaway and Lubrizol. He was just acting in the interest of Berkshire Hathaway shareholders according to his duties. 

This all just seems to be a matter of bad timing and probably bad judgement about the perception of those moves from David Sokol if we take into account that his portfolio turnover is dismal on a yearly basis.

On the right is a timeline of the deal between Berkshire Hathaway and Lubrizol from an article provided by the Wall Street Journal.