Monday, February 20, 2012

Linear Technology (LLTC) 2012 Review

Linear Technology (LLTC) designs and manufacturers high end linear chips which monitor, amplify or transform continuous analog signals associated with real world phenomena (temperature, pressure, weight, position, light, sound and speed) and markets them in over 4,700 products. 

The company has grown profits and dividends between 7-20% annually over the past 10 years earning in excess of a 20% return on equity. LLTC suffered in the recent economic downturn; however, it should be able to resume earnings growth because:

(1) it is broadening its product base to take advantage of infrastructure build out and the trend toward energy efficiency in industrial applications,

(2) long term, it will benefit from the strong global demand for advanced electronics,

(3) gains in market share,

(4) an aggressive cost control effort.


(1) the consumer segment of its business is weak due to low consumer confidence,

(2) its products have been designed out of the tablet market.

LLTC is rated B++ by Value Line, has over 59% debt to equity ratio and its stock yields 3.2%.

Statistical Summary

Stock Yield Dividend Growth Rate Payout Ratio # Increases Since 2002
LLTC 3.2% 5% 54% 10
IND 2.0 9* 50 NA

Debt/Equity ROE EPS Down Since 2002 Net Margin Value Line Rating
LLTC 59% 59% 2 33% B++
IND 15 25 NA 20 NA

*most companies in LLTC’s industry don’t pay a dividend


Note: LLTC stock made good initial progress off its March 2009 low, quickly surpassing the down trend off its May 2008 high (straight red line) and the November 2008 trading high (green line). Long term the stock is in a trading range (boundaries not visible on chart). In the Spring of 2011, the stock broke down from the up trend off the March 2009 low and re-set to a trading range (purple lines). Short term the stock is in an up trend (brown line). The wiggly red line is the 30 day moving average. The Dividend Growth Portfolio owns a 75% position in LLTC, having recently made a trading sale at $37. The upper boundary of its Buy Value Range is $18; the lower boundary of its Sell Half Range is $59.

Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at Strategic Stock Investments is to help other investors build wealth and benefit from the investing lessons he learned the hard way.