New equity rating

I rarely write about investments, let alone investments in specific companies, but since this blog is about my random thoughts, no topic is off-topic.

Yesterday Maxim Integrated Products announced that its reported earnings are down due to expensing of options (from Dow Jones Newswires):

Maxim Integrated Products Inc.'s (MXIM) fiscal first-quarter net income fell 27% as revenue slipped 2.5% and the company began to expense stock options.

This prompted several downgrades from investment firms and analysts, and the stock price duly took a dive of about 13%. From a fundamental point of view, this is completely irrational. Whether or not a company expenses stock options has absolutely nothing to do with its health; it is only numbers. A company’s performance just cannot be captured by a single number, and options are too complicated to be thus accounted for. The analysts know this (or at least I think they should), but they downgrade it anyway to create a big price movement. I think this is a perfect buying opportunity.

One thing I noted this morning, though, is the funny name of a rating by an outfit known as ThinkEquity, of which I have heretofore not heard (both the outfit and its rating system):

ThinkEquity Cuts Maxim Integrated To Source Of Funds