Micron Technology (MU)

They had a huge run last year, but has dropped back after joining the S&P. Some consolidation is expected after a stock joins the index. Now, it's in a consolidation phase as ETFs buy the stock. In a hangover now of $325-425, but there's good support.

Stock's done extremely well. Now let's zoom out a bit. There's a current shift in where profit pools are. Memory has done REALLY well because there's a huge shortage. 

Not a long-term hold. It's known as a "deep cyclical" -- times you make $100 per share, and times you lose $$. This memory shortage is more structural in nature, so at $330 it's worth holding on to. Hold for years 1 and 2 of profitability, but in year 3 market will be anticipating year 4 of potentially negative earnings.

After a huge move, it's digesting. Give it a rest before entering.

He bought this in late October at $223 (doubled since), based on triple-digit revenue and earnings gains, because DRAM pricing continues to rise. Eventually, this pricing will moderate, but when it levels, trouble usually follows. Don't be overweight this as the price approaches $500. He expects a strong report today. He wants to hear them talk about the potential competition from Samsung and others.

Continues to enjoy the boom in data centre building; strong demand will endure. Nvidia gets cheaper and cheaper in terms of PE as shares have risen 50% in the past year, and the market will probably cap shares at $200. Micron will probably see the same fate in the next year or so.

Is up 48% this year. The 6-month chart is insane. They report Wednesday. They enjoy massive YOY growth. DRAM is cyclical, but we're nowhere near the end. He expects MU to meet and surpass expectations.

Memory is a key bottleneck in tech. MU has done very well with memory supply tight. He expects shares to continue to do well. You could even buy it at current levels. Supply will remain tight. Will be volatile.

Great time to pick it up, though it would be nice if you could get it a little lower. Buy 1/3 here, another around $325, and under $300 would be a bargain. He bought a bit this morning around the $380 level. 

Historically cyclical, but AI revolution has taken demand beyond the boom-and-bust cycle. Latest report blew the doors off. Some analysts have targets of $500-550.

The valuation is too high. Is up 362% in one year. A good company. Trades at 41x PE. Analysts expect earnings to increase 500% in 3 years. He thinks earnings will be more than revenues are today. But it's risky. One earnings miss will hurt Micron and the whole sector. If you've owned this for 3 years, take profits.

Demand for memory has gone off the charts. Usually extremely cyclical part of the semi chain, but there's so much demand that supply hasn't caught up. A commodity-type company, so he has no interest in it.

As for NVDA, he has more comfort owning TSM. It means he doesn't have to bet on which horse is going to win the race, but owns the racetrack instead. NVDA's valuation is reasonably attractive. On another material pullback, would probably do a deep dive of research.

TSM has by far the largest market share, so it's a much safer play. MU is one of 3 leading players in memory, which is very cyclical. Right now, it's closer to the bottom than the top, so still further upside. However, these stocks stop working way ahead of the cycle peaking.

Not an expensive stock, but risky because of the cycle. So you need to watch it closely.

They have absurd pricing given strong demand.

The memory storage business is historically cyclical. They are on fire now because there's a massive memory shortage. It also happened during Covid when people are stuck at home on computers, then these stocks sold off in 2022. We will be undersupplied for a long time. (PCs and computers will get more expensive.)