Micron Technology (MU)

Memory chips. There have been concerns on DRAM prices dropping. But he thinks it is a great buy. He likes it here and thinks the industry will prove itself.

Memory chip market is volatile and the price is extremely volatile, so the margins get hit up and down all the time. This has not been a great growth stock for a long period of time. It is almost a cyclical play. You play it when the product cycle is right, when memory prices are rising and when margins are starting to improve, and then you get out.

Trading at a pretty decent valuation at 9X PE with a decent growth rate, putting the PEG ratio below 1.0. One thing to remember about this stock is that it is quite volatile. You are looking at 1.4 beta. It is going to move around quite a bit, but the valuation is there. As the economy gets better and as the technology cycle continues to move forward, this is a good name to own. As a high beta stock, watch for opportunities to buy and watch for opportunities to sell.

Stock got hit today because word came out that Samsung, not this company, will do most of the DRAM work for Apple. It looks like a massive deal that Apple has put together. Given the value and the run up in the company, he expects the impact will be felt. He would be cautious right now.

Semiconductors are a great sector to watch. Today semiconductors are what copper used to be. When they are performing well, this tells you that people have strong expectations for future growth in the economy. There is a very short inventory cycle in semiconductor companies. When the economy is getting better, their orders tend to be coming quite quickly. The group is acting very, very well. This looks very attractive and is not an expensive stock.

Still likes this. Hit a new 52 week high today. Trading at a pretty decent valuation. PEG ratio is under 1. It still continues to offer value. It’s in a cyclical space. We will continue to see the economy improve and companies like this should do well.

Chart shows a long-term uptrend from late 2012. In a one-year chart, the peaks are higher and the troughs are lower and is in a sideways consolidation. More than likely, the bigger picture is in an uptrend and quite likely it will break out.

Semiconductor companies are a very inexpensive group. This is trading at about 7-7.5 times this year’s earnings and has higher growth in the market. He recently took some profits. On weakness, he would definitely be a buyer.

Earnings out last week were good and they beat nicely. This is a stock you want to put away for a couple of years. It had a nice recovery. The memory space had a wave of consolidation so there are not many players left and there is a return to the PC cycle. Computers are more intense users of memory than cell phones and tablets. They have great margins and good revenue momentum. A very good space.

This is all about memory and that particular space is firming up quite a bit. Demand is rising for memory. Flash memory, but more particularly the D-RAM memory. People want new phones and that is going to continue. Trading at a pretty deep discount to its group at 9X forward PE, versus the group at 17X. Thinks the stock will grow at 15%.

This is the cyclical of the tech names. It is a deep cyclical in that when things are going well, things are very, very well, but when they go badly, the earnings just disappear. Closed at $31.04 and his model price is $52.85, a 70% upside. However, the market is sceptical because obviously earnings are great today, but what is going to happen tomorrow. There is a significant discount between the price today and what the model price is. The good news is, it is holding up one of his structural levels and, obviously, the balance sheet has grown quickly as they are aggressively buying back stock. Appropriately priced. If it pulled back to the $24-$25 level, this would be very positive for the name.

Fighting a war against very aggressive competitors, especially Intel. It has always been a very competitive business. Prefers Intel, but it is expensive.

Bought this because this was a fragmented industry that has been consolidated down to 3 players. Historically pricing for D-RAM was quite volatile but there is a lot of pricing discipline now in the market. If there is more pricing discipline and less big new supply, then you could get a higher earnings multiple paid for the shares.

Likes technology as a group. There is a boom in content being distributed and in the need for storage. They make storage for tablets, phones, etc. Historically they were cyclical. In the last 2-3 years there was consolidation in the industry and now there are only 3 companies in the market. There is pricing power and discipline so there are not boom and bust cycles. Earnings multiple may expand because investors don’t have to worry as much about the future.

Semiconductor stocks have run substantially as investors are slowly starting to put their toe in the growth pond. A better semiconductor area to think about right now is Analog Devices (ADI-Q) which is effectively a play on automobiles and industrial production. If you believe that the economy is starting to improve, particularly the US economy, this is probably an interesting area to look at.