Hey guys, I'm back!

I've been following Opnext for a little under a year now and when its stock fell back to $2 I bought some shares.  Then I used a limit order to sell some June calls for $0.20 strike at $2.50.   Some less than intelligent person bought them from me.   Stock went down to the $1.50 level where I think it has a bottom.  I actually have an order to wind down my position in the calls I sold, if someone hits it, I'll sell some more calls and just make cash off the grease (spread between bid and ask price).

This is a bullish position where basically I'm lowing my cost basis from $2, by selling some calls. I'm down in it so far, but these small caps can go down 50% and up 200%, wild rides don't shake me out.

Now for some info about Opnext.  It's an optical components manufacturer, which means it provides parts and devices to primarily Cisco and Alcatel-Lucent.  So when those companies are doing good, Opnext has a modest profit.  When those companies cut back, Opnext's business suffers as can be seen from their last quarter.  Normally, I do not like companies that post net losses, unless they are research stage biotech companies.  The reason I like OPXT is because it is actually a value play, in a tech stock believe it or not.

Market Capitalization: 153 million
Total Cash & Equivalents:  206 million
Total Liabilities (Debt):  109 million

Now, look at that, it's a very rare sight for almost any company out there.  They have so much cash they could pay all their debt off and have almost an equal amount to spare.  If we work the numbers a little, we can figure out how much cash per share they have...

206 - 109 = 97 million

They have 91.15 million shares outstanding... so we take cash divided by the number of shares outstanding.

97 / 91.15 = $1.06 Cash per Share

$1.06 is the amount of their share price that cash represents.  If the share price ever fell below this level, you could make a profit simply aquiring the company, then fire all the employees and sell the assets, keeping the cash for yourself.

Another way to look at it is like this, take their total market cap, and subtract out their cash, and add their debt:

153 - 206 + 109 = 56 million

According to this calculation, the share price is saying that the stock market only values Opnext's business at 56 million.  That's a bargain price for an industry that is seeing consolidation, especially when this company actually turns a profit when things are going well.  Many of its competitors have posted regular net losses for years, while OPXT turned a profit until last quarter when things got bad with the economy.

Also, OPXT has 58 million in receivables, this is money owed to their company presumebly in the next year.  That's crazy!  If those bills are going to be paid, the stock market says the company is actually worth nothing.

Yeah, they're losing money at a fast clip and if that continues for too long it'll erode their cash reserves, but network infrastructure spending can't be put on hold for too long I think.  It seems to me it's something that you invest in for the long haul to improve efficiency.  Even if business doesn't turn this year, simply rumors of business turning will drive this stock up.  For now, I don't think it can become a penny stock because of their cash.  And I find it hard to believe that all their patents, technology, and manufacturing capabilities are worth nothing.  This stock is probably overpriced at $3, but at $1.60 and change it's a bargain.  And while I wait, I'll be selling the occasional call.  Though the call market is very illiquid for this stock.