ASML over IPOD
“Finding investments is easy, waiting is hard, waiting is the hardest part”
-Clay Baker
The Portfolio Performance
The portfolio is up 9.28% YTD
Our benchmark, the S&P 500 is up +19.26% YTD
Buying ASML Today
By the time you read this I will have SOLD our position in IPOD, an unknown SPAC lead by Social Capital, and replaced it with a full position in ASML.
ASML holds a special position in the semiconductor industry as it makes the leading machine for lithography, the process used to print the circuits on a chip. The process is measured in nano-meters, with the latest crop in the 7nm range, but ASMLs technology is currently making 5nm and even 3nm chips a reality.
Each machine is about the size of a city bus and costs roughly $150 million. The machines contain 100,000 parts and 2 kilometers of cabling. Shipping a machine to a customer requires 40 freight containers, three cargo planes, and 20 trucks. The primary customers for these behemoth machines are the world’s big three chipmakers, Taiwan-based TSMC, Samsung in South Korea, and Intel.
ASML earnings are expected to increase over 64% this year and 22.50% next year, which seems low given the order book that should be growing fast. Revenues are expected to by up 38% this year and 18% next year. While the Price/Sales is a bit high compared to its competitors I think investors are paying up appropriately for a company that is growing faster and has a solid moat around the technology that they provide. The Fabless semiconductor companies like Apple, Nvidia, Qualcomm and others need manufacturers that use the advanced technology that only ASML has. My expectation is that analysts will need to come back and revalue the company based on forward guidance. The company reports earnings this Wednesday, I plan to have a full position going in to earnings, and expect to hold the shares for 2-3 years minimum.
The current chip shortage was caused by a combination of customer order cancellations, supply chain disruption and a global shift in demand for certain types of chips, namely for consumer electronics. Even without the disruptions caused by COVID the semiconductor industry has some serious problems with reliability of delivery and an inability to keep scaling up for demand. In short, there simply are not enough semiconductor foundries in the world. Fortunately a whole bunch are being built, both here in the US and overseas.
ASML will be the primary beneficiary of a global build out in foundries as they make the most important machines for extreme ultraviolet lithography. - Clay Baker
ASML Holding N.V. develops, produces, markets, sells, and services advanced semiconductor equipment systems consisting of lithography, metrology, and inspection related systems for memory and logic chipmakers. The company provides extreme ultraviolet lithography systems; and deep ultraviolet lithography systems comprising immersion and dry lithography solutions to manufacture various range of semiconductor nodes and technologies. It also offers metrology and inspection systems, including YieldStar optical metrology solutions to measure the quality of patterns on the wafers; and HMI e-beam solutions to locate and analyze individual chip defects. In addition, the company provides computational lithography and software solutions to create applications that enhance the setup of the lithography system; and mature products and services that refurbish used lithography equipment and offers associated services. It operates in Japan, South Korea, Singapore, Taiwan, China, the Netherlands, Europe, the Middle East, Africa, the United States, and rest of Asia. The company was formerly known as ASM Lithography Holding N.V. and changed its name to ASML Holding N.V. in 2001. ASML Holding N.V. was founded in 1984 and is headquartered in Veldhoven, the Netherlands.
Portfolio Changes Today
ASML BUY 53 shares @ $784.70
IPOD SELL 2,985 shares @ $10.06
"Markets don't go to zero, Portfolio's do.
Buy quality, be patient...and look twice for motorcycles."
- Clay Baker
Stay Invested,
Clay Baker
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Keep Me Honest 2021
The S&P 500 will achieve year-end earnings of $170-$175 (1-1-2021).
We are likely to have a significant pull-back during the 1st quarter, about 5%-10% (1-1-2021).
Stock picking will outperform algorithmic trading again as it did in 2020 (1-1-2021).
S&P 500 will reach 5,000 by year-end.
Clay's Rules
Rule #1: Don't lose money
Rule #3: Portfolios go to zero, markets don't, Stay Invested
Rule #4: When good stocks you own drop 10% below your cost basis, add shares
Rule #5: Bull markets aren't sustained without the Transports
Rule #6: When Forward P/E is lower than TTM P/E, expect earnings to increase
Rule #7: When an investment bank sells below book value, buy it
Rule #8: Tips are for waiters. Do your own homework.
Rule #9: Don't sell a stock because you're bored with it. Do your own homework.
RULE #10: Being early and being late is the same as being wrong...move on.
Rule #11: Investing is easy. Waiting is hard, waiting is the hardest part.
Disclosure: I am personally invested long in some or all of these stocks or funds that appear in the Stay Invested portfolio and may purchase or sell shares within the next 72 hours. I am also invested in other stocks and funds that do not appear in the Stay Invested portfolio but may be mentioned or related to this article. It is not my intention to advise or encourage the purchase or sale of any security. I am invested long in these securities mentioned in this post:
AMD, AMRN, AMZN, AAPL, ARKK, ARKG, CNRG, ENPH, FB, GNRC, GBTC, GLD, HRTX, HD, IPOD, MSFT, NVDA, PSTH, TWLO, VBIV
I am invested short in these securities mentioned in this post:
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. This article is not intended to offer investing advice, guarantee 100% accurate predictions, or to be interpreted as providing a personal recommendation.
