Silicom Ltd. (SILCF)

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Two small stocks to watch
Silicom and Ceragon have proved their worth over the last 3-4 years but investors should still tread with caution.

Shlomo Greenberg
Silicom Ltd. (Nasdaq:SILC; TASE:SILC), and Ceragon Networks Ltd. (Nasdaq: CRNT; TASE:CRNT), are two small Israeli companies that I like and which I have been following for some time. Over the past 3-4 years, both companies have proved their worth in business growth, cost efficiency, and a successful break into a niche. Both have competent management teams which led them to the business breakthrough they are currently enjoying.
The interesting thing here is that the sharp gains in both stocks in recent days, which came in response their second quarter results - and in the case of Ceragon, also as a result of the analysts’ recommendations - have sent the market value of both stocks below their mid-year market cap. Silicom is currently trading at $8.8 with a market cap of $46 million, down from $12.5 and a market cap of $65 million in March. Ceragon is currently trading at $5.1 with a market cap of $136 million, down from $5.6 and market cap of $150 million back in April.

The key issue to remember here is that a stock’s bottom line value on Wall Street is connected to its bottom line on Main Street. Any deviation from a company’s economic value, either higher or lower, should trigger a warning mechanism. A rational investor does not need to constantly check whether a stock has gone up or down, but instead he or she should follow the company’s price, check if it’s high and try to watch out for the “mines”.

Published by Globes [online], Israel business news - www.globes.co.il - on October 26, 2006