With stocks selling off seemingly every day since the Fed’s most recent announcement, the fear is building amongst the longs. And with fear comes opportunity.

We can find some very cheap stocks that are positioned to benefit and grow in the Wearables and/or Internet and/or Drone and/or Robotics and the over-riding App Revolution that are trading at historically low valuations and might very well present a great opportunity to do some nibbling. On that note, here is a new stock I’m adding to the portfolio today. I’m personally starting off with a 1/3 position in it and will add to it in coming days and weeks as per our playbook, using tranches to scale in and diversify my time and price risk.

I’m adding a new somewhat smaller cap tech name to the portfolio here, Silicon Motion SIMO.

Here’s how the company describes itself on its website: “Silicon Motion Technology Corporation (NasdaqGS: SIMO) is a global leader and pioneer in developing microcontroller ICs for NAND flash storage devices and specialty RF ICs for mobile devices.

We are a fabless semiconductor company that designs, develops and markets high performance, low-power semiconductor solutions to OEMs and other customers in the mobile storage and mobile communications markets. For the mobile storage market, our key products are microcontrollers used in solid state storage devices such as SSDs, eMMCs and other embedded flash applications, as well as removable storage products. For the mobile communications market, our key products are handset transceivers and mobile TV IC solutions. Our products are widely used in smartphones, tablets, and industrial and commercial applications.”

Long story short — the company has chips that go into smartphones, tablets and when they say “industrial and commercial applications” they’re talking about the Internet-of-Things, Robotics, Drones and such.

The stock is down from $37 per share to about $25 right now, as it, like Qorvo below, is dependent upon Samsung and Chinese smartphone and tablet growth. The stock chart look absolutely horrible and you know that I prefer to buy my Revolution Investing names that are about to benefit from big sector growth when their charts are at their worst. You can imagine how ugly the charts for Apple and the other tech stocks I was buying for less than cash were back in 2003.

Feet to fire, my analysis of what the Chinese economy and stock market will do for the next year or two is that it’ll still grow some and that there will still be millions of Chinese citizens who will move into middle-class-like income levels and will want smartphones. I expect that the growing Chinese smartphone vendors like Xaomi and Huawei and Lenovo will continue to take marketshare from Samsung and either way, Simo is set to grow again this year.

Simo has $200 million net cash, which is about $6 per share for a stock trading at $24, making up about 25% of its market cap. The market is valuing the stock at $800 million. Analysts expect that SIMO’s earnings should grow from about $2 per share this year to $2.40 next year on 17% sales growth, which I expect is attainable. With the stock trading at $24 today, we’re buying this name for 10x next year’s earnings on a P/E basis and at only 7.5x next  year’s earnings on an enterprise value (subtracting the $6 per share on the balance sheet) basis.

As Robert Marcin put it recently on Scutify: “$SIMO looks like biz is very strong, having been one of the few to beat and raise last qtr. their ssd controller is exploding and their embedded flash controller is growing 20%.” 

You also get 2.3% dividend yield in the stock while we hold it in the meantime, which is better than you get in a savings account. If the company’s fundamentals hold up over the next six months or a year, the stock could pop 50% or more. And as a play on the exploding Wearables and IoT markets, I want to buy some of this stock now before its recognized and/or is benefitting as such.

I’ve been patient waiting for market pullbacks like I’ve explained repeatedly for the last few months, back when the markets were still at all-time highs and long before it was vogue, we want to leave ourselves room with cash and flexibility to navigate the near-term wild sell-offs in the stock markets to our advantage. Now, while fear is thick and markets are down taking individual stocks like SIMO with them, is a much better time to start scaling in.