Analog Devices (ADI)

Quietly becoming a key player in AI infrastructure. Makes components that help move and manage electricity inside data centres. Data centres and related segments are now about 20% of revenue, growing strongly. Also tied into long-term themes of automation, electrification, and industrial recovery.

Strong margins. Not a crowded trade. Sees ~25% upside. Ranks 10/10 on value. Yield is 1.42%.

It's involved in the internet of things and industrial semi-conductors, which have been weak.

Plumbers of the internet for things like toasters, fridges, washing machines. Lagging the tech sector and AI. Turning profits into free cashflow, and very few companies can do that at 100%. Not as risky a play as AI. A utility-type of tech play in your portfolio. Has gone sideways, but profit growth will drive price higher over time.

Financial flexibility lets them increase dividend (up ~15%), pay down debt, invest in R&D (either #1 or #2 in this regard), and make tuck-in acquisitions (grows revenues and profits over time). Rinse and repeat, and you get double-digit returns in the long run.

It reported and beat today. Challenges remain as the car sector hasn't recovered as expected (look at ON Semis and NXP results), but AD executes well under good managers.

12-month price target of $250. He still holds.

Flies under the radar. Has really got into converter products from analog to digital, and vice versa. Also into power management. 12-month price target $212, still about 10% lift from here. Still likes it.

Not sure how much its products going into China are restricted. Analog chips are programmed before added to machines such as fridges and washers, so not as sophisticated. King of that. Decent runway. Buy in thirds here, mid-$180s, and mid-$170s if you're lucky.

Was upgraded recently. You have to believe that they will trough in Q2 2024. They've done a great job managing in a tough environment. He's been buying it in past months as it's underperformed its peers.

It reports next week, which he expects to be strong. Will watch for their guidance to see if there will be a trough in Q2 2024.

If we think AI is going to continue in the way that it is, this is a very inexpensive way to get exposure to machines doing more on their own. Reasonable multiple.

Unique. Technology breakthrough is behind them. New growth is small, replacements are probably a major chunk of sales. Chips will continue to improve, with more stuff being put on them. Depends on chip commodity cycle. Not on leading edge of new technology.

Industrial-focused semiconductors. Great company. Not entirely focused on autos, but it's a blossoming and exciting part of the business. He added this year. Good technological advantage as products, once designed, stay in a system for the life of that system. Well diversified.

Provides converter products and analog signals. Designs and manufactures chips that go into the likes of fridges and sewing machines to do repetitive tasks. A crowded space. A way to participate in semiconductors by moving money from the high-valuation digital side over to the analog side. Price target of $212, decent runway. Yield is 1.90%.

New cars on the road these days are basically computers on wheels, and a GPU runs those cars. The GPU is the brain. Essential. ADI creates all the sensors in the GPU (outdoor temperature, battery level, speed). So, this is a sticky product that will be used in cars but anything product requiring automation. Such sensors will feed back data to the supercomputers that the users will want.