CSR still screaming buy

Well after a week of reading reports and message boards, CSR is still a screaming buy.

The only alarm bell was a chunk of director selling last Tuesday, but this apparently is a regular quarterly feature as the directors diversify their portfolios and make the most of the high share price. After all Bill Gates sells millions of Microsoft shares every day but that does not mean that he does not believe in his company.

I know that when you get excited about a company it is easy to look on every piece of bad news with rose tinted glasses. But there really is very little bad news in the case of CSR! Their market is growing at a huge rate and CSR is the market leader.

I guess the important thing is to work out why the share price is so low. ARM, which is growing at a slower rate, is granted a much higher forward P/E (25 compared to 13.) Maybe investors are not sure if Q3 was a one off rather than indicitive of things to come. Maybe they are worried about competition from TI and Broadcom. Maybe they don't like the seasonality and unpredictibility of the revenue streams. Maybe they are worried that Bluetooth chips will become a commodity. These are all valid concerns and for this reason this company will have to go in my growth portfolio as I consider too aggressive a choice for my mortgage portfolio. However I think there is significant scope for upside over the next 12 months, with anything up to a 100% increase being possible. The downside possibilities are much less likely, making this a company I must own a chunk of.

Unfortunately that means I have to sell something in my growth portfolio. The casualty will be half my Google holding. Google has done superbly already and reducing my holding will give some much needed diversity to this Internet heavy portfolio.

The CSR share price has been drifting down over the last week so I will sell Google at an opportune moment this week and then buy into CSR once the temporary share price decay finishes.