Global Market Comments
August 10, 2018
Fiat Lux
Featured Trade:
(AUGUST 8 BIWEEKLY STRATEGY WEBINAR Q&A),
(SPY), (TBT), (PIN), (ISRG), (EDIT), (MU), (LRCX), (NVDA),
(FXE), (FXA), (FXY), (BOTZ), (VALE), (TSLA), (AMZN),
(THE DEATH OF THE CAR),
(GM), (F), (TSLA), (GOOG), (AAPL)
Posts
Global Market Comments
July 27, 2018
Fiat Lux
Featured Trade:
(LAST CHANCE TO ATTEND THE FRIDAY, AUGUST 3, 2018,
AMSTERDAM, THE NETHERLANDS GLOBAL STRATEGY DINNER),
(STOCKS TO BUY ON THE OUTBREAK OF TRADE PEACE),
(QQQ), (SPY), (SOYB), (CORN), (WEAT), (CAT),
(DE), (BA), (QCOM), (MU), (LRCX), (CRUS),
(ORIENT EXPRESS PART II, or REPORT FROM VENICE)
Global Market Comments
July 23, 2018
Fiat Lux
Featured Trade:
(FRIDAY, AUGUST 3, 2018, AMSTERDAM, THE NETHERLANDS
GLOBAL STRATEGY DINNER),
(THE MARKET OUTLOOK FOR THE WEEK AHEAD,
or IT'S SUDDENLY BECOME CRYSTAL CLEAR),
(SPY), (TLT), (QQQ),
(AMZN), (MSFT), (MU), (LRCX),
(REPORT FROM THE ORIENT EXPRESS)
Global Market Comments
July 2, 2018
Fiat Lux
Featured Trade:
(THE MARKET OUTLOOK FOR THE WEEK AHEAD, OR THE FUTURE IS HAPPENING FAST),
(HOG), (TLT), (ROM), (MU), (NVDA), (LRCX),
(SPY), (AMZN), (NFLX), (EEM), (UUP), (WBA),
(THE WORST TRADE IN HISTORY), (AAPL)
Global Market Comments
June 25, 2018
Fiat Lux
Featured Trade:
(THE MARKET OUTLOOK FOR THE WEEK AHEAD, OR IS THIS A 1999 REPLAY?),
(AAPL), (FB), (NFLX), (AMZN), (GE), (WBT),
(JOIN ME ON THE QUEEN MARY 2 FOR MY JULY 11, 2018 SEMINAR AT SEA),
(JUNE 20 BIWEEKLY STRATEGY WEBINAR Q&A),
(SQ), (PANW), (FEYE), (FB), (LRCX), (BABA), (MOMO), (IQ), (BIDU), (AMD), (MSFT), (EDIT), (NTLA), Bitcoin, (FXE), (SPY), (SPX)
It was one of those normally mundane seasonal events.
But what I heard blew my mind and will substantially shape my trading and investment strategy for 2018.
By now you already know that I used some of my stock market winnings this year to buy a vintage Steinway concert grand piano (click here for "The Great Inflation Hedge You've Never Heard Of."
Well, you can't own a Steinway without a recital, and ours was held last weekend.
After listening to an assortment of children display their skills with Pachelbel, Ode to Joy, and The Entertainer, we adjourned for a celebratory buffet dinner.
Making small talk with the other parents, I asked one particularly articulate gentleman what he did for a living. He, too, had enjoyed an excellent year, and also used his profits to buy a Steinway, although his was a cheaper upright model.
It turned out that he was the chief technology officer at LAM Research (LRCX).
Had I heard of it?
Not only did I know the company intimately, I had recommended it to my clients and caught the better part of the nearly 400% move since the beginning of 2016. Furthermore, I was expecting another double in the share price in the years ahead.
Was I right to be so bullish?
The man then launched into a detailed review of the company's prospects for the next three years.
The blockbuster development that no one outside the industry sees coming is China's massive expansion of its semiconductor production.
More than a dozen gigantic fabrication plants are planned, the scale of which is unprecedented in history. Some of these fabs are 10 times larger than those built previously.
This is creating exponential growth opportunities for the tiny handful of companies that produce the highly specialized machines essential to the manufacture of cutting-edge semiconductors, including Applied Materials (AMAT), ASML (ASML), Tokyo Electron (TOELY), KLA-Tencor, and LAM Research (LRCX).
Everyone in the industry has boggled minds over the demand they are seeing for their products.
The reality is the artificial intelligence is rapidly working its way into all consumer and industrial products far faster than anyone realizes, creating astronomical demand for the chips needed to implement it.
Bitcoin mining is also creating enormous new demand for chips that no one remotely imagined possible even two years ago.
As a result, the industry has been caught flat-footed with severe capacity shortages. They are all racing to add capacity as fast as they can. Profit margins are exploding.
On October 17, (LRCX) announced Q3 revenues of $2.48 billion, a staggering increase of 51.84% over the previous year, and a gross margin of 46.4%. The operating margin was 28%, generating net income of $591 million.
That gives the shares a very reasonable price earnings multiple of 16.95X, a 10% discount to the 18X multiple for the S&P 500. That is an incredible deal for one of the fastest growing companies in America.
Samsung of South Korea was far and away its largest customer, accounting for 38% of total sales.
On November 14, the company announced an eye-popping $2 billion share repurchase program that is certain to drive the price higher.
If there is one dark cloud on the horizon, it is the loss of the research and development tax credit embedded deep in the proposed Republican tax bill.
This will have a noticeable and negative impact on (LRCX)'s bottom line. Still, my friend thought that the company could offset this loss with faster sales growth and margin expansion.
However, many other technology companies in Silicon Valley won't be able to bridge that gap. It is a hugely anti-technology move for the government to take.
My fellow Steinway owner thought that LAM Research could easily see sales double in three years as long as there is no recession, which I believe is at least two years off. As for the share price, he couldn't comment, but remained hopeful, as he was a large owner himself.
Of course, the trick is how to buy a stock that has just risen by 400% in two years. So, you could start scaling in here, and build a larger position over time.
You only get opportunities like this a couple of times a decade, and it's better to be too aggressive than too cautious.
To learn more about LAM Research, please click here to visit the company website.
A Steinway Model D
_________________________________________________________________________________________________
Quote of the Day
"The market always gets it right," said Jim O'Neill, the chairman of Goldman Sachs International, who coined the term "BRIC."
Global Market Comments
April 13, 2018
Fiat Lux
Featured Trade:
(ANNOUNCING THE MAD HEDGE LAKE TAHOE, NEVADA, CONFERENCE, OCTOBER 26-27, 2018),
(APRIL 11 GLOBAL STRATEGY WEBINAR Q&A),
(TLT), (TBT), (GOOGL), (MU), (LRCX), (NVDA) (IBM),
(GLD), (AMZN), (MSFT), (XOM), (SPY), (QQQ)
Global Market Comments
March 29, 2018
Fiat Lux
Featured Trade:
(IS IT ALL OVER FOR ARTIFICIAL INTELLIGENCE?),
(GOOGL), (TSLA), (NVDA), (LRCX), (AMD), (BOTZ),
(CHINA'S COMING DEMOGRAPHIC NIGHTMARE)
Legal Disclaimer
There is a very high degree of risk involved in trading. Past results are not indicative of future returns. MadHedgeFundTrader.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein. Affiliates of MadHedgeFundTrader.com may have a position or effect transactions in the securities described herein (or options thereon) and/or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies.