This semiconductor stock is still 20% off its high, but one fund is betting nearly $50 million on the stock

• Boston-based Portolan Capital Management added 289,844 shares of Semtech in the third quarter.

• The total value of the position increased by $30.68 million from the previous period.

• As of September 30, Portolan reported that it owned 668,862 shares of Semtech stock valued at $47.79 million.

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Boston-based Portolan Capital Management announced the purchase of 289,844 shares of Semtech Corporation (NASDAQ:SMTC)increasing its stake by approximately $30.68 million, according to a Nov. 13 SEC filing.

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 compared to the previous quarter. The estimated value of the position increased to $47.8 million, with the new holding representing 2.6% of the fund’s reported US equity assets as of September 30. The fund reported 119 total positions.

Top five positions after the quarter:

• NYSE:MOD: $85.6 million (4.6% of assets under management)

• NASDAQ:TTMI: $68.5 million (3.7% of assets under management)

• New York Stock Exchange:ELF: $64.6 million (3.5% of assets under management)

• New York Stock Exchange:DBRG: $64 million (3.5% of assets under management)

• NYSE:CLS: $62 million (3.4% of assets under management)

As of Friday, Semtech shares were trading at $72.97, up about 15% from last year and only slightly below the S&P 500’s gain of about 16.5% in the same period.

• 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 advanced integrated circuits and algorithms directly to original equipment manufacturers, suppliers and through distribution partners globally.

• It serves the 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 industrial and infrastructure 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 based on its specialized product offerings and established relationships in business and industrial end markets.

At about 3% of total assets, Semtech’s growing position is significant without being aggressive, especially compared to larger bets on consumer, industrial and infrastructure names that anchor the rest of the book. In other words, this looks like a conviction addition, not a turnaround 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 earnings per share (EPS) of $0.48, nearly double where it was a year ago. Meanwhile, the margins are quietly doing the heavy lifting. Adjusted operating margin expanded from 18.3% to 20.6%, while free cash flow increased to $44.6 million for the quarter. Management also guided for another sequential revenue increase next quarter, suggesting the recovery is broadening rather than stalling.

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

AUM: Assets under management: The total market value of the investments a fund or manager oversees.
Stock AUM: The portion of assets under management invested specifically in stocks or equity securities.
Final 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.
Bet: The ownership interest or interest in a company by an investor or fund.
Room: A three-month period used by companies for financial reporting and analysis.
CAGR: Compound Annual Growth Rate: The average annual growth rate of an investment over a specified period of more than one year.
OEM: Original Equipment Manufacturer: A company that produces parts or equipment used in another company’s final 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.

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

This semiconductor stock is still 20% off its high, but one fund is betting nearly $50 million on the stock. Originally published by The Motley Fool.