Reflections on Aehr

Investment Analysis Clubs Saul’s Investing Discussions
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This is a quote from my mid Oct post on mid-Oct portfolio changes:

“AEHR - At the end of September I had a 20.4% position in Aehr. It was my largest position. On the 5th of October they issued quarterly results. After a lot of reading and thinking I decided it was insane of me to be carrying such a large position.

I decided to cut my position in half, then reduce my position by three quarters, then just have it as a tiny keep-it-on-the-radar position, and finally I decided to completely exit, and I sold my entire position over the last six trading days and reinvested all the money in other stocks.

I had been very enthusiastic about the company, and the earnings report was very good, so why did I change and decide to exit? I realized that very good things are PROBABLY coming in the future but that, about those good things, there is no way of knowing HOW MUCH? or WHEN? or FOR HOW LONG?

Everything was uncertainty. I didn’t even have any idea what the next quarter results would bring, and it seemed clear from the conference call that the CEO didn’t know either, and he had no idea as to when his expected customers would place orders, or how big they would be. I’m much more comfortable watching this from the sidelines, but if you decide to stay in, I wish you all the best. This company may boom and leave me in the dust, and if so, more power to it…

What did I do with the money ? Well I put a lot of it into a new 10.1% position in ELF, which has been well discussed on the board.”

Following that, one auto company after another kept announcing cut-backs in electric vehicles, which was the current main use for Aehr’s machines. This was on top of the CEO begging customers to place orders during the last conference call, something I’ve never seen before, ever.

Well, where are they now?

AEHR has dropped from my exit point of $38.5 to $18 something in the aftermarket, down over 50%. Sure my exit price of $38.50 was way down from the high of $54, but it was the best I could get.

ELF closed yesterday at over $154, up over 50% from my entry point at around $100.

Now if one stock is down more than 50% and the other stock is up more than 50%, the money I switched to the second stock is worth more than 300% of the current value of the first. And this is in just three months!!

I’m sorry for the people who stayed in and suffered this. Some of the people who stayed in are very, VERY, smart people, and people who I usually REALLY look up to when evaluating companies. I’m not posting this to brag. It’s to emphasize the importance of selling when it’s indicated instead of staying in and hoping, and suffering the opportunity cost as well. Here are some relevant quotes from my Knowledgebase:

“Not accepting that an investment could be a mistake as it continues to go down is a dangerous error, and could be very expensive. A big problem investors have is getting attached to their previous decisions and not being willing to consider that they may have made a mistake…

I try to always pay attention to criticism of a stock, to reevaluate my investments, and to get out if it turns out that I’ve made a mistake, or if the situation has changed. Which is part of why I rarely end up holding stocks for 5 or 10 years.

Sometimes changing your mind in the face of new evidence, and selling when necessary, is the most important thing you can do . If you are wrong, you can always buy back in. I think that being willing to change my mind in the face of new evidence is one of the most important skills I have. And learning that it’s okay to change your mind when appropriate is one of the most important things I try to teach on this board.

Let me remind you that sometimes I make mistakes getting into a company (big mistakes, on occasion), but that I am willing to consider the possibility that I was wrong, and change my mind when I see that I actually was wrong. And that that is very important. Although I realize that I sometimes make mistakes by selling, I don’t regret my decisions. So what! I figure I did the best I could at the time. I can’t be right all the time….

You don’t have to be right about the stocks you sell, just the ones you hold in your portfolio . It simply doesn’t matter what happens to a stock after you sell it. The only thing that matters is what happens to the stocks that you are holding. You can’t hold all the stocks in the market and there are hundreds that go up Think about that!

There’s no such thing as “I was so far down I couldn’t sell” . The stock price has no memory of the price you bought it at. It’s at the price it’s at. That’s the reality of now. The question about any stock is “What decision should I make about it now, at its current price and its current prospects?” Not, “What price did I pay for it?” unless you are planning for tax losses or gains. Price anchoring is a big mistake… You can’t make it go back in time to where you bought it. I’d suggest you put the money into something better….

Why hold on to your failed positions? They have little going for them except that you are already in them. I doubt you would dream of buying most of them now if you didn’t already have a position in them. I just don’t think you should hold on to a poorly functioning company on the basis that it might transform itself into something successful in the future.

I’m not saying my replacement stocks always do better than the stocks that I’ve sold. What I’m saying is that I do my best and use my judgment, and over time I expect that companies I think are going to do well, will, on average, do better than companies I think will do poorly. (If not, I should just put it all in an index fund.) If I sell a particular stock and it then outperforms my replacement stock over the next quarter, so what? I’m not perfect. I’m just trying to do a good job. That’s how I think about it anyway….

Saying that “it would be better if I held” because at some time in the future the price went back up up is not valid (it’s silly, even). Just think of a stock that you sold at $200. It dropped to $50. It gradually came back and now, 5 years later, it’s at $220. Would you say it was better to have held because it’s now up 10% in 5 years!!! That really is silly. You could have thrown the money at a dartboard of MF recommendations and beat that result by 500%. And could have done lots better than that by intelligent picking.

There’s a big opportunity cost to leaving your money in a stock which keeps going down, and then stays down, as well as whatever paper loss you have.”

I’m really sorry about what has happened to Aehr,
but it seemed to me that it was practically announced way, way, ahead of time.

Best wishes.

Saul

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Although I got out of AEHR on 12/20 with a -40% result, and I am happy about that, this statement you made is extremely complex in my opinion. And this is the main adaptation of my style that I decided to make after the 2022 bloodbath. There is what you said (warning signs, more or less clear depending on the company and the investor), but there is also long-term strategies and market analysis (not only company analysis). I also don’t want to brag, just offer an opposing view. For example, CRWD, ZS, and DDOG. Many of the board exited their positions because of slowing signs and uncertainty on their previous quarters. But I decided that other businesses offered even less certainties than these and I doubled down. I saw the growing dominance of CRWD in endpoint protection, the solidification of ZS as a zero-trust powerhouse, and the high NRR of DDOG in a complex niche as observability is (despite the very high price of its solutions), as signs that, to me, it was worth betting on a longer term approach on these companies.
I got lucky and in the one-year period (1/10/23 through 1/10/24) CRWD made +186%, ZS made 116%, and DDOG made 81%. They are my top 3 positions now. Throughout the second half of the year, I added to CRWD and ZS, and trimmed DDOG (as I said above, it’s the most complex of the 3).

At the same time, this is dangerous too. I am the guy who lost 90% on UPST… As I said, very complex. The only truth is that, in hindsight, everyone is 20/20. :grinning:

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The foundation, well one of the fundamental beliefs of a buy-and-hold investor is that you cannot time the swings in the market or a given stock. If you exit a position of a good company who stumbled, will you be able to pick the right time, if ever, to re-enter.

As above, I am still in AEHR, I exited S under similar circumstances, only to see it up well over 50% from that level. I am trying to surmise the optimal process and am striking out.

PLTR is another fallen angel that may be finding its wings. Does anyone have any thoughts on its current situation in light of this discussion?

Thanks,
Vince

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Trying to boil this down - Saul, you identified a link between EV sales and demand for AEHR and acted upon it. Your belief is that EV sales and therefore, AEHR demand will remain low for the next 6-12 months at least. You nailed it so far.

If you are correct going forward, then the opportunity cost is in staying in. If not, the opportunity cost is in getting out.

Vince

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Hi Rodatl, and congratulations on your rides with CRWD and ZS. However do you think it makes any sense to compare them with AEHR.

Sure, CRWD and ZS slowed but continued growing well, had no “bad” results, and continued to be dominant in their field (shared with Palo Alto), and grew profits enormously.

Aehr, on the other hand, is a tiny company with $2 million in billing this quarter and basically one customer, or one and a half perhaps. If things don’t pick up rather rapidly it seems to me that things really don’t look good for them as a company, not at $2 million in billings per quarter. No comparison with CRWD and ZS. Staying in one of them is entirely different than staying in Aehr.

JMHO
Saul

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You are absolutely right, no comparison at all. Big x tiny, SAAS x hardware, broad x niche… I guess what I am trying to say is that a better knowledge of the industry and competitive landscape helps to “validate” such decisions, instead of just going “quarter to quarter” results’ analysis. For example, I exited AEHR not primarily because EV sales were slowing down, but because all manufacturers are looking to replace SiC due to its high cost. Rivian, for example, apparently reduced the need on the front motor of its cars (the less powerful one), according to some specialized EV journalists I follow. With such an innovative field, I don’t want to bet against them…

On S, another example, although it grew after I exited, I exited because it needed to grow more due to its small size compared to CRWD, in my opinion. CRWD did much better in the year, so I was “right” on that one.

On RELY, I left with winnings (which was a tough decision for me, I tend to stay too long) because I didn’t have confidence on its moat, despite its good results.

All these decisions were influenced by the competitive landscape of each company, in conjunction with their individual performances. I guess that’s my point.

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I have thoughts. The big one: Don’t learn the wrong lesson from SentinelOne.

I don’t know exactly when you sold, but SentinelOne was absolutely a sell in my book. They were lowering guidance, restating numbers, etc etc. Sure it’s up from the lows, but how much more, percentage-wise, is CRWD up since that same point in time? Sometimes the market is kind to all stocks, or all stocks in an industry. Just because it’s up doesn’t tell you much. How has it done vs its peers?

Also, what’s the opportunity cost to you? How has it done vs the rest of your portfolio? The SentinelOne lows coincided with market lows, so hopefully you have other stocks that are up as much or more than it is.

And re PLTR, don’t think about companies finding wings or the market’s sentiment and animal spirits and all that. Look at PLTR’s numbers and see how they’re doing. Last I looked it wasn’t too impressive, but if that’s changed, please write it up for the board.

Bear

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As a new guy, who has been heavily process oriented on published quarterly metrics, the significance of Saul’s (and perhaps others) message here, is a dominant importance of guidance and market conditions yet to have impacted published metrics. I entered AEHR at a bit under $30 with pretty good published numbers - without acknowledgement of guidance and market indicators. I have a small position and plan to hold at this juncture.

Graydrake

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Just a word of defense for AEHR as a business. It is no longer correct to say they have just 1 customer. This is from their report last night:

"We have made significant progress in expanding our customer base for SiC and GaN wafer level burn-in for a wide variety of applications. We currently have a total of seven customers purchasing our solutions for SiC and GaN devices and are also actively engaged with more than two dozen SiC and GaN companies to address their needs for wafer level test and burn-in of these devices. Importantly, 10 of these additional companies have already engaged with Aehr for on-wafer benchmarks. We have never lost a full wafer level burn-in evaluation since introducing our FOX-NP and XP configured with the SiC and GaN nitride test resources, and we believe we will have over 12 SiC/GaN customers buying our wafer level test and burn-in solutions by the end of calendar 2024.

"In anticipation of both our current and new customers’ forecasted needs, Aehr has put in place the inventory, infrastructure, and processes to increase our manufacturing and installation capacity as well as significantly lower our lead times to meet our customers’ future capacity needs.

"While we have seen delays in orders from our automotive customers, we are seeing a pick-up in opportunities for SiC wafer level burn-in for applications outside of the electric vehicle market, including industrial, solar, and commuter electric trains as the efficiency and value of SiC is being recognized for these additional markets. While the largest market opportunity for SiC is still electric vehicles and charging infrastructure, industrial and other power conversion market segments represent significant additional opportunities for SiC and for Aehr’s products. William Blair forecasts that the total silicon carbide market is growing at a CAGR of greater than 40% to $8.5 billion in 2025, and over 25% of that will be in industrial and energy power conversion applications.

In terms of the overall market for what they do, it’s complex. But it’s far larger than EVs…but still in early stages. I know from other threads there are a LOT of people here who know a lot about chips and testing. Erickson went into a lot of wonky chip weeds on the call; so, for those who are interested in that detail, here’s a link to the call transcript.

JR

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I’ve been meaning to follow up on some of Saul’s moves vs my own for some time now, but this seems to be a good story to use.

Saul, if I may, you say you got out and that you had reasons x and y to do so. This has happened in the past, but I try to heed the idea of not just blindly following you in a knee jerk reaction. Many times, this has looked very painful at the time because we know this board can move markets. I tend to hold for a bit and digest your decision and see what decision I come to on my own.

I was contrarian on UPST for a bit, I am contrarian on ETSY (although it is greatly reduced over time) and I am VERY contrarian (to this board) on stocks like Rivian and Rocket Lab. So I do make my own decisions and things seem to be doing ok. Not perfect, but ok.

To me, Aehr is a stock that is going to need patience. I am not as nimble, moving into and out of stocks, as many of you founders and DEFINITELY not as nimble as you Saul. You have the data, you have time to review it and reach a decision. Then you (VERY HELPFULLY) post your data and your decisions. But I need that time to review and reflect and ponder before I make a move.

So…just calling that out because NONE of us SHOULD ever get out at the same price you did. Those numbers can ONLY apply to you and what you decided. I look at those numbers and feel a bit defeated because here we are, and I am sitting on half my Aehr position at a -58% for that position. (The money from other half has moved into things that are up, so there is that.) Should I read this post (and other reflections of yours) as a sign I am wrong, that I made a mistake, that I stink at investing…(???)

No, I am not you. I am willing to wait a couple of earnings reports before I change to my mind. I can change it to leave completely (like I have TOAST) or to cut back for now (like I have for Etsy and Aehr). I am unwilling to go back to the days of when I just followed every news cycle and freaked out about why I was never making money.

This is not an attack on you Saul. This is a comment that sometimes your reflections come across in a way that implies we should have just blindly followed you. I know (well I believe) you do not mean it that way, but when you call out people that are still in the stock and ask rhetoricals, it makes me start to (in a tiny way) second guess my self.

Is there some opportunity cost associated with my still having a bit of Aehr, probably. But again, I am NEVER going to be as nimble as some of you on this board. I have to invest in a way that I can do consistently. I LOVE your data and your posts and your insight…but I can never be you. So while your reflections are extremly important from a learning perspective, most of us will never be you. We have to take your moves with some grain(s) of salt and see what we want to do.

At this time, I am still only on step three of your reductions and (maybe) I will eventually exit. But for now, I am NOT counting opportunity costs since I think there is enough going on to keep an eye on this one. I am going to wait to see what the next earnings tells us and make a decision there.

Hopefully that rambling made a bit of sense. Keep teaching us please, but don’t think we made mistakes if we didn’t jump ship just as fast as you did.

Thanks.

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I don’t speak up often, but I feel I need to here.

Saul did not suggest that anyone sell out of AEHR because he did. He suggested that people sell out of AEHR because, as he writes:

" Everything was uncertainty. I didn’t even have any idea what the next quarter results would bring, and it seemed clear from the conference call that the CEO didn’t know either, and he had no idea as to when his expected customers would place orders, or how big they would be."

Missing this distinction is to miss the point of this invaluable board.

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Having decided to stay in AEHR, I unsurprisingly took a little different tack. There were recent signs in the media EV makers were slowing down, but it was hard to imagine things had dried up to this extent for Aehr especially with the gallium nitride customer announcement. While Erickson says the company has “not reduced our growth expectations for the years ahead…[as we]…continue to hear from our current customers,” what they are hearing has quickly become lots of business talk with little business action. That’s not good.

The main thrust of Aehr’s thesis the last few quarters was being in the right place at the right time with a product that looked like an ideal compliment to a burgeoning EV market. Now that the EV market has slammed the brakes (pun intended), any “right place” Aehr possesses has been overshadowed by its uncertain timeline. That simply doesn’t fit in a concentrated portfolio, especially when I feel there are now better places for our money. I don’t care about the stock or the price. I only care whether I have conviction AEHR is one of the best companies I can own. It was before earnings (flawed thinking or not), and now it’s not…so we’re out.

What’s my process lesson? Well, if everyone remembers, TMDX saw similar price action into its last earnings report. That one has turned out just fine. Heading into this earnings, I was part of some discussions around AEHR’s chances of a TMDX repeat. Being honest with myself, I put it about 70/30 before TMDX’s report its flight move was going to not only be fine but a winner. Turns out I was more right than the market (so far). With AEHR I felt about 20/80 we’d get a TMDX-type surprise with something like a 30-35% chance they’d have to lower the guide. Maybe not quite as pessimistic as the market, but waaay less convicted into earnings than I was with TMDX. Turns out the market was more right than I was on this one (which won’t be the last time I guarantee). Luckily, I had less capital sunk into AEHR than TMDX going into these prints.

What does that mean next time this scenario comes up (which I know it will)? I don’t exactly know, but I do know I’ll be taking out the fine-tooth comb to find out whether my conviction into the report lines up more with the TMDX scenario above or AEHR’s. I admittedly fell for “how much more downside can there be?” Well, as usual, the market said “enough downside to make you navel gaze once again.”

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Hello Ashersdad,
Keep in mind what I said was that I needed to process the same amount of data that Saul “already” had processed.

You have the data, you have time to review it and reach a decision. Then you (VERY HELPFULLY) post your data and your decisions. But I need that time to review and reflect and ponder before I make a move.

The reason I post that is that none of us should do anything just on ANYONE’s word, including Saul. No distinctions missed, and yes this is a very valuable board.

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In my view, there’s short-term and long-term certainty/uncertainty. I disagree with Saul on the long term uncertainty of AEHR. They have a uniquely advantaged product/service in a long-term growing market. No market grows in a straight line up and to the right, so I expected that there will be hiccups along the way. The market for EVs is not just growing, but inevitable in my estimation. This same view of EVs led me to a very rewarding investment in TSLA more than a decade ago - I saw EVs as the future and I didn’t see how Tesla could not be a major player in that new market. I feel less strongly about AEHR - a lot less strongly to be honest - but for my constantly small position the risk/reward felt, and still feels, balanced.

This discussion reminds me of a Morgan Housel Fool article on Monster Beverage from 2016:

Monster Beverage (NASDAQ: MNST) was the best-performing stock from 1995 to 2015. It increased 105,000%, turning $10,000 into more than $10 million.

But this isn’t a retrospective about how you should wish you owned Monster stock. It’s almost the opposite.

The truth is that Monster has been a gut-wrenching nightmare to own over the last 20 years. It traded below its previous all-time high on 94% of days during that period. On average, its stock was 26% below its high of the previous two years. It suffered four separate drops of 50% or more. It lost more than two-thirds of its value twice, and more than three-quarters once.

And MNST wasnt unique - Housel looked at the next 9 highest returning stocks over those 2 decades and found similar patterns. Now, a lot has changed since 2016 (for instance, I wouldn’t want to own any of those 10 stocks today), but the point remains that short term gyrations in stock or even company performance may or may not be indicative of a change in long term company performance.

For me with AEHR, my confidence in the eventual success of EVs is unshaken. Interest rates have hurt the consumer’s ability to purchase large ticket items like cars, and EVs are therefore suffering. But, long-term I expect interest rates to decline, the economy to improve, and people will again buy cars, which means more people will buy EVs as the tech keeps getting better the economics compared to ICE vehicles keeps improving. As a result, I expect AEHR to do well in the next 2-3 years.

As I re-read Saul’s comments on why he sold, I still disagree with them today. In my view, the real reason to have sold was that we all knew that, outside of Tesla and the Chinese OEMs like BYD, automakers were having issues selling EVs. Heck, many were literally announcing pull-backs in their EV programs. THAT was that warning that short-term AEHR was going to have a tough time. But, the long-term view for the company, in my estimation, remains intact. If anyone has a long-term contrary view based on company performance, I’d like to hear it.

So, now comes the opportunity cost issue. This is indeed very real. Staying in a stock that you’re pretty sure won’t do well for at least a couple of quarters is not something people who manage their investments closely want to do. As luck would have it, the EV market is stumbling as much of the rest of the market is recovering, so moving funds out of AEHR late last year was a good thing for active investors to do.

Heck, I even sold some TSLA to buy NVDA when it dropped below $425 because I saw that AI is taking off and Nvidia was being punished too heavily because of uncertainty around China in the short-term. But, I didn’t sell any AEHR because frankly it was too small a position for me to play and it’s a company I believe will do well in the future. That was certainly a bad decision, no argument there, but I’m not sweating it. And if the stock drops further, I will absolutely look into whether I should increase my investment.

I know at least some people here sold, or at least didn’t buy, into Nvidia after last quarter’s report over concerns about China exports or market cap/law of large numbers issues. We’ve now seen NVDA climb almost 14% in a week. Was it a mistake to sell at $425 last year, and if so, are people buying in at $542 today? That’s $100 of “buy back” lost opportunity on Nvidia making products that we all knew they were going to make.

To sum up, Saul was absolutely right to sell AEHR when he did, although I disagree with his reasoning.Also, AEHR is not a company I will avoid as I think it has a bright future as the macro environment in which it operates recovers, which I expect to happen during this calendar year.

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I did not suggest one should follow anyone into or out of a position. I did suggest there is power in Saul’s process of considering leading indicators not yet in included in published metrics.

Graydrake

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I don’t want to deviate from the real topic of discussion here (Aehr), but I do think @Fool4ZTribe has a point here. Everyone is entitled to their own approach, and I agree that most of the time, selling immediately is the right move in order to stay invested in high-conviction positions. But there is merit when one thinks the market has overshot the other way.

For example, since the day after S’s disastrous Q1 report (June 2, 2023):

  • Crowdstrike: +85%
  • SentinelOne: +82%
  • ZScaler: +60%
  • Samsara: +36%
  • Axon: +29%
  • Datadog: +22%
  • Monday: +11%

Again, I do not want folks to take the wrong lesson here. I’m willing to bet that in most cases, @PaulWBryant is absolutely right, and a poor report translates to poorer stock performance. But sometimes, there are rewards for those that are willing to bet that the market’s reaction was too extreme. In the end, I think guessing how the market will balance the interpretation of a poor report with a company’s valuation requires too much mental gymnastics (in my opinion).

-RMTZP

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Sorry in advance for adding another post here but I feel I need to make a point here about S.

But for completeness and the record I agree with Saul, Bear and Stocknovice above. I held AEHR after the last Q’s results and I was stupid for doing so. Period. I saw the signs, articulated them wrote them down - but for some weird, silly, unknowable reason (FOMO?) I kept a small position hoping it would bounce. So for my part, thanks for pointing it out Saul, I need to learn a thing or two still.

About SentinelOne, I have to disagree with RMTZP…because one needs to really have a very, very good eye and timing to catch that one single day in which it would have made sense to buy S (because keeping it is the same as buying, right? You can sell any day.), and get that nice 82% return above.

I made that point in this post.

Basically, measured from just about any other day except the one day after S reported a disaster of a quarter (which is the day you chose to show the +82% return above), S would have done atrociously. Relative, absolute, whatever.

How about November 15, 2021? From that date S is down 66%. CRWD on the other hand is UP 10.7% from the same date.

I know because I owned S in stead of CRWD and still have the scars and the burnt cash pile to prove it. Let’s definitely not learn the wrong lesson from S, amen, Bear.

-wsm

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100% agree with these comments @rodatl . This is also how i adapted “Saul’s style” to suit me. I also held onto companies like DDOG and SNOW, and added to these positions when the sentiment for these stocks was negative (not boasting - over the years my returns are nowhere near as good as those on this board). But just to illustrate a point, looking at only the quarterly numbers I probably would have sold DDOG and SNOW (that what I used to do up until just over 2 years ago); but recognizing the “long term strategy” of these companies encouraged me to hold; eg. because the slow down these companies showed was due to cloud optimization which is a factor which is completely out of the control of these companies, and not due to a fundamental issue with the company or their products. I’m not saying that DDOG and SNOW will return to previous levels of growth - no, because I think much of their growth previously was due to pull through - but I did/do fully expect a return to a reasonable level of growth.

I think we are now faced with a somewhat similar situation for AEHR, in the sense that the poor earnings is due to a factor which is outside the control of AEHR and not due to a fundamental issue with the company. AEHR operates in a cyclical business. Presently the Auto chip market is in a downturn - this is impacting AEHR’s business - given the small size of AEHR we are seeing an outsized impact on the numbers that AEHR is reporting. I’m not saying the auto semi downturn is the ‘only’ reason for AEHRs poor perforance, but I do think it’s having a big impact; and I don’t think there is anything fundamentally wrong with AEHR’s business. Here is a quote from the CEO made in the earnings release: “Despite this uncertainty in the timing of orders, we remain confident about the future demand for our unique semiconductor test solutions and the markets they address. We have not reduced our growth expectations for the years ahead, where we continue to see tremendous opportunity.”

For companies like AEHR that are in the cyclical semiconductor sector, buying during the downturns is probalby what one should be doing if you wish you maximize returns. How long the downturn will last is not knowable.

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WSM,
Are you disagreeing - or proving the point? If you held S the day before its great fall - then on the next day sold and moved into any of the alternatives listed above, you would have underperformed S significantly in the following months save for moving into CRWD, which basically performed a hair better. But there was no need to time the rebound of S if you remained holding it, you got it. The folks that sold - they had to get the timing right of whatever they went into,

I find this discussion fascinating and illustrative and I appreciate the contributions of all toward my hopefully improving investment philosophy.

Vince

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The point here is to act decisively when new information becomes available. Opportunity costs are a huge factor for having a concentrated growth portfolio, and the calculation of showing the difference in resulting funds between staying in AEHR or switching from AEHR to ELF is absolutely remarkable.

On the surface the difference doesn’t seem too large, staying in one company versus switching those funds to a new company. In this particular case it turned out to be a 300% change as a result and proves why it’s so important to be in your own highest conviction stocks and not hoping for a turn around on any given company.

For me the story of Aehr is really a CEO who got over enthusiastic and then swung to the other side of begging customers to get their orders in. From the Q3 2023 report he said this,

Thank you. And you know what, if you walk around this building, there’s a lot of happy, proud people here because it’s – there’s – it’s funny. We all believed it. Everybody has been working their b** off. Like if we build it, they’ll come.*

And we are just believed in our hearts that this would play out and for having sake, sometimes it works out. And we’re seeing it’s not just silicon. I think silicon carbide will go down as the one thing that was sort of the one that really pushed the industry over to widely adopt wafer level burn-in, but then it’s going to – we’re already seeing people saying, well, if you use it for that, can I use it for this as well. So it’s been a long time coming, and we have a long way to go. It’s really exciting.

And then two quarters later he was pleading for customers to get their orders in,

We literally can ship up to, call it, 50, 80, 100 testers, call it, wafers or blades of capacity a month, we are shipping more per month than the combined number of installed base of every other competing alternative has ever shipped. But there’s still a scenario where please get your orders in so that we can continue to make sure that we can address everybody’s needs. But I’d just reiterate, obviously, we’re expecting significant amounts of orders in the fiscal year to be able to turn to make $100 million and then without 0 backlog, and we’re sticking to our guns there.

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