GTAT – How a Quick Trade in GT Advanced Technologies Became A Long-Term Investment

The following article contains information about GT Advanced Technologies (ticker: “GTAT“).  It should be noted that as of the date of this article, the author is an active investor in this company.

GTAT – How a Short-Term Trade Morphed into A “Hold”

You might look at the evidence, and decide that I simply got “lucky”.  Indeed, by some measures, perhaps I was a bit lucky.

But as I like to tell people, luck is simply the point where preparation meets opportunity.

So, from that regard, yes, I did get lucky in my trade-turned-investment in GT Advanced Technologies.

But there are a few very important lessons to be learned here.

First, when I made my initial investment in GTAT back in January of 2013, it was considered a dog.

In fact, an article was published calling GT Advanced Technologies the “most hated stock” in the market.

As evidence, the article pointed to the absolutely massive short interest – which at the time was over 40% (crazy, I know).

The reason for the bearish mindset about this company was pretty obvious – the company operated almost exclusively in the solar industry.

The company’s future, at least on the surface, looked decidedly grim.

So, you might be wondering, why exactly did I pick up shares in the “most hated stock in America”?

Really, there were three reasons:

1. The share price of GTAT had already fallen precipitously.  I like to look for quick stock trade opportunities among the downtrodden.  That’s where, if you can separate the diamonds from the bullshit, you can find some of your very best stock trade or stock investment opportunities.  If you were going to buy into this company, Q1 of 2013 was the time to do it.

2. The massive increasing short interest was the perfect setup for a classic “short squeeze”.  Realistically, how could you possibly have that high of a short interest, and not soon have the bears cannibalizing each other?

3. I discovered that more than a few hedge funds were gobbling up shares.  This was enough for me to begin to believe that GTAT might not be all that it appears.  It might just have a bit of life left to it, that was not readily apparent to the market.

Based on these three factors, I bought a nice position in the company stock in the low $3 range. I was anticipating a quick spike over the course of a month or two up to say $4.5 or $5, at which point I full intended to dump the shares and enjoy my quick 30%+ gain.

But something happened on the way to $5 – GT Advanced Technologies focus began to shift.  What had formerly been a component provider in the solar industry evolved into a producer and refiner of sapphire.

Which, interestingly enough, a few key electronics manufactures that you may have heard of – like, say, Apple (“AAPL”) – are beginning to use in abundance – rumor has it, many or all iPhone 6 screens will be sapphire glass.

When the stock price quickly hit $4 a share, I contemplated exiting my position…but something told me to wait. That there could be more to this company than the opportunity to make a quick buck on a short-term trade.

So I didn’t sell at $4 a share, or even at $5, the $6, then $8 per share later on in 2013.

In fact, I still hold my original position in GTAT today. And I’m sure glad I do.

You see, GT Advanced Technologies isn’t the same “dog” of a company that it appeared to be back in Jan 2013.  Sure, the short interest is still very high (over 30% as of this writing).

But the company’s future is very bright, with two sapphire production plants either under construction or planned, primarily to supply product to Apple.  The company hasn’t even started to see the benefits of its new partnership with the electronic 500-pound gorilla, and the share price has risen as high as $19.44/share.

So what will happen in Q4 2014 and into 2015 when GTAT starts to reflect the fruits of its labors with Apple?

My new price target for GTAT is $50/share, which I believe is not only possible but probable, at some point in 2015. Once this stock begins to show positive earnings, and its sales increases exponentially due to its contract with Apple, the stock price is likely to explode.

I will hold onto my tidy investment in this stock – bought at a smidgen over $3/share, until the stock price has hit at least $50/share, at which point I might consider existing, with the multi-bagger of multi-baggers, and a great stock trading – turned – investing story to tell the kids.

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