This Semiconductor Stock Is Still 20% Below Its High but One Fund Is Betting Nearly $50 Million on Shares

Boston-based Portolan Capital Management disclosed a buy of 289,844 shares of Semtech Corporation (NASDAQ:SMTC), raising its stake by an estimated $30.68 million, according to a November 13 SEC filing.

What Happened

According to a filing with the Securities and Exchange Commission (SEC), Portolan Capital Management increased its position in Semtech Corporation (NASDAQ:SMTC) by acquiring 289,844 additional shares over the previous quarter. The estimated value of the position rose to $47.8 million, with the new stake representing 2.6% of the fund's reported U.S. equity assets as of September 30. The fund reported 119 total positions.

What Else to Know

Top five holdings after the quarter:

• NYSE:MOD: $85.6 million (4.6% of AUM)
• NASDAQ:TTMI: $68.5 million (3.7% of AUM)
• NYSE:ELF: $64.6 million (3.5% of AUM)
• NYSE:DBRG: $64 million (3.5% of AUM)
• NYSE:CLS: $62 million (3.4% of AUM)

As of Friday, Semtech shares were priced at $72.97, up about 15% over the past year and only slightly underperforming the S&P 500's roughly 16.5% gain in the same period.

Company Overview

Company Snapshot

• Semtech offers analog and mixed-signal semiconductor products, including signal integrity, protection, wireless, sensing, and power management solutions.
• The company generates revenue by designing, manufacturing, and selling integrated circuits and advanced algorithms directly to OEMs, suppliers, and through distribution partners globally.
• It serves enterprise computing, communications, industrial, and consumer electronics markets, with a diversified international customer base.

Semtech Corporation is a leading provider of analog and mixed-signal semiconductor products, leveraging a broad technology portfolio to address high-growth infrastructure and industrial applications. The company’s strategy emphasizes innovation in signal integrity and power management, supporting mission-critical systems for global OEMs. Semtech’s competitive advantage is built on its specialized product offerings and established relationships across enterprise and industrial end-markets.

Foolish Take

At close to 3% of overall assets, the growing Semtech position is meaningful without being aggressive, especially compared with larger bets in consumer, industrial, and infrastructure names that anchor the rest of the book. In other words, this looks like a conviction add, not a swing-for-the-fences trade.

The fundamentals help explain why. Semtech just posted a clean quarter, with record revenue of $267 million, up 13% year over year, and adjusted EPS of $0.48, nearly double where it stood a year ago. Meanwhile, margins are quietly doing the heavy lifting. Adjusted operating margin expanded to 20.6% from 18.3%, while free cash flow climbed to $44.6 million for the quarter. Management also guided to another sequential revenue increase next quarter, suggesting the recovery is broadening rather than stalling.

For long-term investors, this looks like a bet that steady margin expansion, disciplined R&D, and exposure to infrastructure-driven demand can compound over time, even if the stock never regains its old hype multiple.

Glossary

AUM: Assets Under Management – The total market value of investments a fund or manager oversees.
Equity AUM: The portion of assets under management invested specifically in stocks or equity securities.
Trailing twelve months (TTM): The 12-month period ending with the most recent quarterly report.
Position: The amount of a particular security or asset held in a portfolio.
Stake: The ownership interest or share held in a company by an investor or fund.
Quarter: A three-month period used by companies for financial reporting and analysis.
CAGR: Compound Annual Growth Rate – The mean annual growth rate of an investment over a specified period longer than one year.
OEM: Original Equipment Manufacturer – A company that produces parts or equipment used in another company's end products.
Mixed-signal semiconductor: An integrated circuit that processes both analog and digital signals.
Signal integrity: The quality and reliability of electrical signals as they travel through circuits or systems.
Distribution partners: Third-party companies that help sell or deliver products to end customers.
Fund holdings: The individual securities or assets owned by an investment fund.

Jonathan Ponciano has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Celestica, Modine Manufacturing, and e.l.f. Beauty. The Motley Fool has a disclosure policy.