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.

He used to love it until he sold it recently. The problem with it is that the chip business is wildly volatile, and it's hit a bad patch. His FMV shows a 300% upside. Nice balance sheet. But the business it's in is volatile. You can take a
crack at it at $42.

Incredibly volatile, both this stock and the "memory" chip space. If you like semi-conductors, then look at the semis' capital equipment companies. The real money is made by the people who supply the picks and shovels. Now is the not a good time to enter this industry because revenues will be down 10-20% in the quarter. But revenues should be higher in 2019. Look at this space in Q4.

(A Top Pick August 28/17 - Up 12%.) Covered call selling JAN 30 calls. They were called away. More volatility here.

Semi-conductors are seeing a buying signal lately. He thinks tech will continue to be a leader in this inflationary area and likes the earning growth of this company. This is one of the companies than controls market share in the space.

This is a cyclical stock. Over half of its business goes to China. It is at peak earnings. His model price is $196.21, which is a 250% upside, but this stock never trades on its earnings because it is cyclical. He expects the stock to trade over and under his EBB+3 price level which, a year from now, is $82, still much higher than its current price around $60. The stock pays no dividend.