Pixelworks (PXLW)

Company. Pixelworks produces "system-on-a-chip ICs for the advanced display market. Pixelworks' solutions process and optimize video, computer graphics and Web information for display on a wide variety of devices used in business and consumer markets, including flat-panel monitors, digital televisions and multimedia projectors." (company website)

Buy. It has to be confessed: the reason I bought Pixelworks is because I am pigheaded. An earlier purchase of PXLW ended in an 8% loss, and I was determined to atone for my misjudgment.

In fairness to myself, this time the signs were good. Unfortunately, right after I bought, PXLW started to slide. Perhaps investors were spooked by the SEC, that asked for additional information about the pending merger of Pixelworks and Genesis Microchip. This was a strange merger to be sure: Pixelworks was a much smaller company, and after it bought GNSS, the former owners of GNSS would own most of the combined company. Some analysts called it a "reverse merger" although that made even less sense to me. The Market never bought into the merger, and the spread never came together; if anything it widened.

In for a penny, in for a pound, I hung in far too long, determined to avoid a repeat of the previous PXLW trade, in which I sold prematurely on the inevitable dip after a new peak. The picture went from bad to worse, and I decided to just ride it out.

In early August, the companies announced that the merger would be withdrawn. The market responded with a solid jump and a recovery in PXLW stock price.

Sell. Yesterday, the price jumped nearly a dollar, and this morning I found out why: withdrawing the merger resulted in removing a charge against earnings in the previous quarter, switching GAAP results from a loss to a profit.

Fearing that this bubble might burst (rising almost $2 in three days), I put in a trailing stop order for 6%; the sell order would be activated if the price fell back down 6% from however high it got. As it turned out, the price rose to nearly $10 per share before it began to retreat. Eventually it activated my sell order, and my shares sold in two lots at two different prices.

One could say, "Well, you should have sold when it got near $10 instead of waiting for it to slide back down." Yes, one could say that. But, it might not have fallen 6% from the high, and my stake could have gone on to rise another day. Or it might not have. PXLW closed at $6.18.