• NVE Corp (NSDQ: NVEC) – Up 26.5% since October 2016.
• Parker-Hannifin (NYSE: PH) – Up 23.8% since June 2015.

When I added NVE Corp (NSDQ: NVEC) to the portfolio back on October 20th, I honestly couldn’t have timed it any better.

While the shares remained essentially flat over the following couple of weeks, news broke that NVE was awarded a government contract to use its technology to develop a salmonella detector to help prevent food recalls. It was also featured in a couple of articles from Zacks Equity Research, touting its high dividend yield and the fact that the research outfits current year earnings estimate for the company had surged more than 20%. Honestly, the company got more press in November than it typically does.

That drove a nice pop in NVE’s share price, which has gained more than 25% since my initial recommendation and is now trading well above my limit price. Now trading at 29 times trailing one-year earnings, it’s also stretched its valuation well above its third quarter reading of 24.6 times and its five-year average of 22.8. Honestly, even with the positive attention, it’s starting to look a bit too highly valued for me.

I still think NVE Corp is a great company which hasn’t even come close to reaching the limits of its technology. Thanks to the miniaturization possible with its spintronics technology that is also rugged and able to stand up to a lot of abuse, plus the fact that spintronics is still underutilized, there’s still a lot of growth possible. But the share price and its valuation has run so far, so fast, I think our best bet is to take our gain and maybe come back to it later.

Sell NVE Corp.

I’m also selling Parker-Hannifin (NYSE: PH) for a 23% gain. A maker of motorized leg braces which had just received FDA clearance for use in the US, it was added to our portfolio in June 2015 as a play on the growing use of exoskeletons. A major conglomerate even then, those braces weren’t going to have a huge impact on earnings and revenue then and they’re about to have even less.

Parker-Hannifin announced last month that it plans to acquire Clarcor (NYSE: CLC), which makes industrial filters, for $4.3 billion in an all-cash deal. With nearly $1.5 billion in revenue last year, Clarcor will give a nice boost to Parker-Hannifin’s already sizable $11.4 billion in annual revenue. But that also means that it is going to be even less of an exoskeleton play than before.

I’m not hung up on only investing in pure plays because, when it comes to breakthrough technologies, they’re often developed by large conglomerates. But with the upcoming acquisition of Clarcor, Parker-Hannifin’s exoskeleton business could growth exponentially every quarter and still not move the needle on overall growth. That means the company won’t be a play on our original thesis, so it won’t pay to continue holding it (unless you like the filter business).

Sell Parker-Hannifin.

MicroVision Announces Secondary Offering

Last Friday virtual reality company MicroVision announced it sold more than 12 million shares of common stock in a secondary offering at a share price of $1.07, resulting in an immediate 20% decline in the value of its stock to offset dilution created by the issuance of these new shares. After deducting underwriting expenses the company should end up with nearly $12 million of additional cash to use for “general corporate purposes.”

Although we don’t like seeing one of our Special Situations holdings take such a steep dip in value, secondary stock offerings such as this are sometimes necessary for a small-cap stock like MVIS to buy enough time to make it through to profitability. It should be noted that the company has no long-term debt, and it grew sales revenue by more than 66% during the most recent quarter on a YOY (year-over-year) basis so nearly all of its quickly growing cash flow can be reinvested back into the growth of the business.

For that reason our long term outlook for MicroVision remains unchanged, and we continue to believe that it will eventually be acquired by one of the large tech companies intending to dominate the Virtual Reality sector. MicroVision continues to sign new licensing agreements for its leading-edge projection display technology, and four the five Wall Street investment banking firms that actively follow MVIS have it rated as a ‘strong buy’ with a one-year share price target of $3.22.

MVIS remains a buy up to a reduced limit price of $2.