This column is for investors willing to take more risk and potentially receive more reward.  The stocks mentioned in this column are not recommended to buy or sell.  They're brought to your attention so you can investigate them further to determine if they fit your risk profile.  Most of the stocks will have less than $1 billion of market capitalization, have more volatility than other stocks, and oftentimes no earnings.  And some will have tremendous stories.

October 16, 2008 - Monolithic Power Systems, Inc. (MPWR-NASDAQ) designs, develops, and markets analog and mixed-signal semiconductors. The company produces power management integrated circuits (ICs) for DC to DC converters, LED drivers, cold cathode fluorescent lamp backlight controllers, Class-D audio amplifiers, and linear ICs.

Only a few months ago, this stock hit its all-time high of $29.07. Now you can buy all you want for $14.50, at this writing. Stifel, Nicolaus, a brokerage firm in St. Louis, just upgraded the stock to a Buy rating on September 8. Another analyst, this one at Wedbush Morgan had this to say on August 25 : Patrick Wang reiterated a "Strong Buy" rating on Monolithic Power, and called a recent weakness in the stock a buying opportunity. The company's third-quarter business fundamentals, he added, "remain robust with healthy shipments and bookings supporting reasonable expectations for (the second half of the year)."

Even with these positive comments, the stock slid noticeably. The one factor that seems to account for it: in the past few weeks director Kuo Wei Herbert Chang, has been selling a significant portion of his ownership in the company.

We'll see if that's the only reason very soon. On October 23, the company will hold its earnings conference call at 5 pm, EST. To access the teleconference webcast, go to the Investor Relations page of the MPWR website at http://ir.monolithicpower.com, and click on the webcasticon. From this site, you can listen to the teleconference, assuming that your computer system is configured properly. In addition to the webcast replay, a phone replay will be available for seven days after the live call at (617) 801-6888, code# 46174185.

Here's what to expect. According to consensus from 13 analysts who follow the stock, MPWR should show 3rd quarter earnings of 32 cents a share, up from 27 cents in the same quarter last year. The range among the analysts was from 30 cents to 34 cents. Next quarter, consensus is for 31 cents a share, up from 26 cents a share last year. For the year, look for $1.04 (well above the 74 cents of 2007), then $1.35 next year. Earnings have grown an average of 68% a year over the last 5 years. Analysts predict average annual growth of 23.75% in the next 5.

Revenues are projected to be $47.70 million for the 3rd quarter, up from $40.17 million in last year's same quarter (up 18%). For the year, analysts see $170.25 million, a 27% increase over last year's $134 million. Next year, analysts project sales of $195.46 million, up by 14.8% over this year.

These numbers were generated at least a month or more ago. With the very recent and devastating financial global economic crisis, they are being refigured as you read this. None of the countries where MPWR does business is faring well. With strong economic stimulus packages just starting, it will take a while for any noticeable recovery. So a caveat is in order, especially when one of the directors has been selling such a large amount of stock. There may be some surprises coming in the next few quarters that aren't positive.

Of course, that's exactly why the stock is down more than 50% in a matter of weeks. Investors are sceptical and with good reason. Why should MPWR be the exception when most other companies are feeling the effects of a global recession? The question has to be: how much has MPWR been affected? Part of that answer will come next week at the conference call, not only in the reported earnings but also in management's description of future orders.

More numbers: P/E is 19.3 but Forward P/E is 11. Price to Sales is 3.14 and Price to Book is 3.24. Profit Margin for the last 12 months was 18.52% with an Operating Margin of 21.58%. Return on Equity was a very respectable 23%. There's $80.33 million in cash, making for $2.39 a share in cash. Current Ratio is 3.465. There are 33.7 million shares outstanding with insiders owning 25.63% of those. There is no dividend.

MPWR has shown good growth in the last 5 years, in earnings and sales. Unless the worldwide economic slump intensifies to extreme levels, it should continue to perform well. If you find this stock of interest, definitely listen to the call. And if you think you're likely to buy this stock after further investigation, you should wait until after the call, just in case there is news that doesn't match expectations.

- Company Web site: www.monolithicpower.com

- Ted Allrich