Micron Technology (MU)

It is supposed to earn $10.46 per share next year, but the market is only projecting less than $2 per share. About 80% of their sales are into China. He worries about the potential trade war impacts. They have accused their Chinese partner on a project for stealing intellectual property. He would peck away at this, but sees $19 as a possible lower test point. They have a very small position in Micron.

The chip space is down to three players occuping 95% of the market, so these companies are focussed on earning investor returns. AI and self-driving cars will be a tailwind. Yes, the stock has traded off from $60 to $40 a share. InvestorS saw this as a deeply cyclical company. True, but he sees this as a growth cyclical company. It has a lot of free cash flow and has promised a large share buyback.

Another chip company. Profitability has really jumped. 2.7B in cash. Very volatile stock, more of a trade than an investment. If there’s a falloff from electrification because of a recession, they’ll be hit hard first.

He thinks semi-conductors are heading down. He would sell this one – especially as the momentum is coming out of this sector. Another 10% drop in the sector overall, could cause another major fall in value.

Tariffs are not a good thing, of course. But more importantly be worried that the chip cycle has turned. There were strong numbers before, but not going forward. Numbers ahead don't look good. Avoid.

It's very cyclical. It has consolidated the space as leader, so there's less competition now. This cycle is not over, but it's trading below its 50-day moving average. If you're a value investor, you could buy it now, but the technicals don't impress him.

It has two things he likes. It has good price momentum and good valuation. Chip makers are meaningfully cheaper than software companies. This is a very cheap company, about 4 times earnings. They have all struggled recently but that is not a reason to give up on them. Hang on to it or take another look at it.