I'm Reiterating my Buy rating for FormFactor Inc. (NASDAQ: FORM), first recommended on July 6, 2009 at a price of $19.90, but there are qualifiers. One thing that hasn't changed: Don't invest in FormFactor, a designer and manufacturer of wafer probe cards for the semiconductor industry, if you can not tolerate high risk and volatility. FormFactor's stock price can rocket 30% higher, then plunge 25%, in the same month.
However, if you can tolerate the rollercoaster, better quarters are ahead for FORM: wafer probe card sales should increase in 2010, and orders are likely to increase as FORM's clients rebuild inventories that were pared-back during the nearly two-year recession. The First Call FY2009/FY2010 EPS estimates for FORM are a loss of $2.77 and a loss of 39 cents.
Technically, FormFactor's stock chart, as noted, is not for the squeamish: a quintessential rollercoaster. Still, the overriding technical signal is bullish: an uptrend, albeit one that re-tests the 50-day moving average about every month.
Stock Analysis: FormFactor is a high-risk stock. Don't Buy FormFactor if you cannot tolerate 20-30% stock price swings in a month. If you've already purchased the company's shares, hold them. If not, and you can tolerate high risk, consider buying a 25% position in FORM now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your FORM position before December 2009. Sell/Stop Loss if you were to buy shares in this company: $13.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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