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May 27, 2010 Stock Pick: AXT, Inc. (ATXI)

Stock Price: $4.23

AXT, Inc., together with its subsidiaries, designs, develops, manufactures, and distributes compound and single element semiconductor substrates for wireless communications, lighting display applications, and fiber optic communications applications. The company sells its products through direct sales force in the United States, as well as through independent sales representatives in France, Germany, Japan, South Korea, Taiwan, and the United Kingdom.

We believe semiconductor related stocks are about to have a resurgence as form factors in various devices require unique technology. We expect this resurgence to have a positive effect on AXTI.

AXTI is involved in semiconductor substrates for the wireless communications and fiber optic communications market. These are both markets that are also having a resurgence.

AXTI is well positioned to take advantage of the market opportunities. AXTI has around $35.7 million in cash, cash equivalents and short-term investments on the balance sheet. AXTI has little debt with long-term debt of only around $0.40 million.

AXTI has over 7 times as many total assets as total liabilities. AXTI is also trading at a market cap of only around $130 million with revenue last quarter of around $18.64 million and net income of $2.58 million.

AXTI has been cash flow positive the past four quarters. AXTI has an impressive chart and is currently in a dip and attractive buying opportunity after AXTI recently reached a new 52-week high at $4.89.

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