I continue to own FSI International $FSII ($3.00), stuck with seeing daily selling pressure offset by the fear of selling out at the bottom.  This stock, like many others I follow from a fundamental perspective, is unfortunately telling me that a global recession is on its way.  Never mind the growth opportunities presented by the global penetration of smartphones, tablets, automotive, and the continued move towards smaller geometry devices (28 nm, etc.), the economy trumps all when it comes to the consumption of semiconductors and planned expenditures on semiconductor equipment.

Operating leverage that cuts both ways and the lack of visibility in orders beyond a quarter or so wreak havoc on semiconductor equipment investors when the outlook turns questionable.  At $3.00 $FSII sports a market capitalization of $120 million, with working capital of around $80 million.  I further expect the company will see its cash balance go from $22 million at the end of the February quarter to nearly $50 million as the next two quarters of significant growth are reported and inventory comes down.  Consensus estimates still suggest the company will grow nicely for the next several quarters, with EPS expectations of $0.68 for the August 2013 fiscal year.  It’s tough to sell a stock with those financial characteristics, but until we see some improvement for Europe’s economic prospects and get a better handle on the slowdown in Asia, I will remain a short-term bagholder.

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