Sucking My Thumb to a Poor Investment Return - TSEM

On Monday, I closed my investment position in Tower Semiconductor (“TSEMS”).? I opened the position on July 24, 2023.? This was an arbitrage acquisition play.? Intel (“INTC”) was attempting to complete the acquisition.? The holdup, however, was China.? In the end, China blocked the acquisition, and the merger died.

I knew that there was a real possibility that China would block the acquisition, so I had to be prepared to hold TSEM shares as a stand-alone company.? I was, and therefore, I maintained a position in TSEM post-acquisition cancellation.

TSEM share price tumbled after the INTC acquisition failed.? TSEM, as an Israeli based company, was impacted by the October 7th terrorist attacks.? TSEM share price hit rock bottom on 10/17/2023 at $21.43.? My cost basis was 35.62, which means I was down roughly 40%!

The fundamentals of the company, however, did not change because of October 7th, so I remained a shareholder. The stock slowly recovered and reached a 52-week high of $44.18 on July 24, 2024.? This would represent a return of 24%, had I sold. At this point, the stock price of over $40 for TSEM was pricey.? I should have sold but I was sucking my thumb.? All the while, the geopolitical situation in the Middle East continued to deteriorate.? Today, an errant missile that kills many civilians in Israel will likely cause the conflict to go to full war between Israel and Iran and their affiliates.?

In addition, there is financial risk in the markets.? Valuations for tech stocks are not appropriate.? Tech stocks have seen a decline in price over the last month, and I do not think we are near a bottom.

For these reasons, especially the Middle East geopolitical concern, I decided that the fundamentals for TSEM have changed, and it was time to sell.? Thus, on Monday, I did just that, at a share price of $36.42.? That means I received a 2.25% return for my year plus holding in TSEM.

The 2.25% return is terrible.? I give myself a D grade for this investment.? Had I sold a week before, I would have had a satisfactory return.? I did not, and when I realized that there was far more downside risk than upside, my return was next to nothing.? ??

The good news is that I was able to recover my principle in full.? The terrible news is that the return on this investment was below what I could have done elsewhere, by a large margin.

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