Suggestions for a sound share investment

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  • adindas
    adindas Posts: 6,813 Forumite
    First Anniversary Name Dropper First Post
    edited 24 July 2022 at 12:27PM
    I don’t disagree, I’m just saying Alphabet themselves report Q2 earnings next week. If they miss, as others have been missing, the entry you talk of could be lower.
    Fully Agree with this. It might be better to wait until they report their earning
  • Notepad_Phil
    Notepad_Phil Posts: 1,377 Forumite
    First Anniversary First Post Name Dropper
    adindas said:
    I don’t disagree, I’m just saying Alphabet themselves report Q2 earnings next week. If they miss, as others have been missing, the entry you talk of could be lower.
    Fully Agree with this. It might be better to wait until they report their earning
    Or put 50% of your intended sum in now and 50% after they report their earnings - unless you're certain they're going to beat expectations.
  • adindas
    adindas Posts: 6,813 Forumite
    First Anniversary Name Dropper First Post
    edited 24 July 2022 at 4:48PM
    adindas said:
    I don’t disagree, I’m just saying Alphabet themselves report Q2 earnings next week. If they miss, as others have been missing, the entry you talk of could be lower.
    Fully Agree with this. It might be better to wait until they report their earning
    Or put 50% of your intended sum in now and 50% after they report their earnings - unless you're certain they're going to beat expectations.

    This might be another approach.
    But to me, I do not like to put 50% of the money especially in this current climate. I prefer to DCA in a smaller chunk buying 1-2 stock at a time and if they fall further down I will keep increasing my position. If the price has gone beyond what I am expecting, I will move on and try to find another alternative.
    But I am also using the technical analysis when adding position, at least finding the previous support/resistance level in the chart.
  • adindas
    adindas Posts: 6,813 Forumite
    First Anniversary Name Dropper First Post
    edited 19 August 2022 at 1:26PM
    The current condition in Taiwan and global semi conductor chip shortages, create an opportunity for chips industries. But the most sigini9facnt one are companies producing machines to make chips in my opinion.

    While there are a few chip designs, foundries, there are only a very few companies are making semi conductor chip machines: ASML, Lam Research, Lam research (the only credible competitors), Nikon, Canon (unheard nowadays in this area).
    Taiwan is the largest advanced chips manufacturer in the world but they still buy their chips machine from ASML. Sense of urgency, the wake up call for national security putting pressure for each individual country to focus on building their own chip manufacturing at home which will keep the demand of companies producing chip machines will be soaring. Example of the wake up call, the recent 2022 chip act passed in the US
    I have been eyeing ASML for sometimes now. I understand they are the leading manufacturer of the most advanced chip making machines to be installed in Chip Foundries.
    https://www.youtube.com/watch?v=iSVHp6CAyQ8
    I watch in other videos they are the only the manufactures of machines capable of producing 5nm chips.
    They are generating Free cash flow increasing year after year. Not to mention the current shortage in chips supply. It looks at least two years to add or built new chip foundry,
    The are profitable and have pricing power as I understand they have no competitors for EUV (extreme ultraviolet) in manufacturing the smallest chip in the worlds. Those who want to compete will be lagging a few years.
    My only problem is that they are still expensive.
    The last five years P/E ratio is still 37.93. The last five years P/FCF 26.97. I am looking for about 20 ideally. But I will bite when they fall to around 23.
    What do you think. Will you be considering buying it ? Do you think it is already good to bite at the current price ?
  • Millyonare
    Millyonare Posts: 551 Forumite
    First Post First Anniversary
    Not sure I'd be investing in the global chip industry just as it swings from undersupply to glut. China is getting ready to flood the industry with cheap copies mid-decade. Dozens of new factories in multiple countries opening all over the world. A great investment in 2012, but not in 2022. Dyor, etc.
  • adindas
    adindas Posts: 6,813 Forumite
    First Anniversary Name Dropper First Post
    edited 19 August 2022 at 1:31PM
    Not sure I'd be investing in the global chip industry just as it swings from undersupply to glut. China is getting ready to flood the industry with cheap copies mid-decade. Dozens of new factories in multiple countries opening all over the world. A great investment in 2012, but not in 2022. Dyor, etc.
    Appreciate your opinion. Every people who know how to analyse competition in the market will understand about

    Security (wake up call) -> Redundancy (over supply) -> leading to Glut

    This concept is not directly applied when there are high barrier for entry.

    Re-read what I am writing above watch and Look at the diagram. I am not talking about the general chips industries, the designer like AMD, NVIDIA, QCOM or the foundries e.g TSMC, INTC or Both Designers and Foundries: INTC, Samsung but I am talking about the company that supplies DUV (Deep Ultraviolet) and EUV (Extreme Ultraviolet) Lithographic machines to these companies.
    There are only a few in this world could manufacturer the machine like ASML. It is immersion lithography that allowed actualisation of process in nano meter nm using a light source. ASML is currently the only the manufacturer of the chip machines capable of producing 5nm chips.
    Whatever countries around the world want to do to speed up the chips production they will still need to buy machine from ASML and the like at least for a few year to come. It is only a handful of companies make this sort of machines and literally ASML has no competitors for EUV (extreme ultraviolet) in manufacturing the smallest chip in the worlds. Those like Lam research (the only credible competitors), Canon, Nikon (unheard nowadays in this area) have been lagging a few years and would need years to catch up with ASML When they manage to catch up ASML might have moved to 3nm chips.
    For transparency I am not pumping this stock as I do not currently own this stock. We take our own gain but we also take our own loss, so do DYORs before jumping. To me I will bite if I see P/E ratio, P/FCF is around 23.
  • Millyonare
    Millyonare Posts: 551 Forumite
    First Post First Anniversary
    adindas said:
    Not sure I'd be investing in the global chip industry just as it swings from undersupply to glut. China is getting ready to flood the industry with cheap copies mid-decade. Dozens of new factories in multiple countries opening all over the world. A great investment in 2012, but not in 2022. Dyor, etc.
    Appreciate your opinion. Every people who know how to analyse competition in the market will understand about

    Security (wake up call) -> Redundancy (over supply) -> leading to Glut

    This concept is not directly applied when there are high barrier for entry.

    Re-read what I am writing above watch and Look at the diagram. I am not talking about the general chips industries, the designer like AMD, NVIDIA, QCOM or the foundries e.g TSMC, INTC but I am talking about the company that supplies machines to these companies.
    There are only a few in this world could manufacturer the machine like ASML. It is immersion lithography that allowed actualisation of process in nano meter nm using a light source. ASML is currently the only the manufacturer of the chip machines capable of producing 5nm chips.
    Whatever countries around the world want to do to speed up the chips production they will still need to buy machine from ASML and the like at least for a few year to come. It is only a handful of companies make this sort of machines and literally ASML has no competitors for EUV (extreme ultraviolet) in manufacturing the smallest chip in the worlds. Those like Lam research (the inly credible competitors), Canon, Nikon (unheard nowadays in this area) have been lagging a few years and would need years to catch up with ASML When they manage to catch up ASML might have moved to 3nm chips.
    For transparency I am not pumping this stock as I do not currently own this stock. I will bite if I see P/E ratio, P/FCF is around 23.

    Of course, everyone knows who ASML is. The US and EU have been using them as a pawn in the global chip wars for years.

    China on their own today in 2022 is already up to 7nm. Few expected it so soon. It won't be long before they get to 5nm and 3nm.

    A falling tide drags down all ships. ASML won't be immune to any chip cycle of factory oversupply and gloom.

    ASML is a quite incredible company of mind-boggling complexity. But the best time to invest was 2012, not 2022.

    The future in the 2020s and 2030s for the Western chip industry looks much tougher. A factory glut cycle, falling prices from oversupply, barriers-to-entry for premium chips lowering, brutal International sanctions that can pop up or change in a flash at any moment, fierce politicisation of raw materials, China tech fast catching up, Taiwan invasion likely before 2049 anniversary, a lot of red flags.

    Not investment advice, just a personal view. Dyor, etc.
  • Millyonare
    Millyonare Posts: 551 Forumite
    First Post First Anniversary
    Nvidia and Micron absolutely tanking this week. Looks like the semi industry still has further to fall.
  • adindas
    adindas Posts: 6,813 Forumite
    First Anniversary Name Dropper First Post
    edited 10 August 2022 at 10:02AM
    Nvidia and Micron absolutely tanking this week. Looks like the semi industry still has further to fall.

    Both Nvidia and Micron have fallen since few days ago, it seems to me like a falling knife. General wisdom in investing, "do not catch the the falling knife"

    The reason for falling in my opinion, Nvidia provided a softer-than-expected outlook for its July quarter. The company cited the impact of both reduced business in Russia and Covid-related manufacturing shutdowns in China. In March, Nvidia had announced the halt of all product sales in Russia. It is slowing consumer demand exacerbated by the Russian embargo. Also analysts started lowering their price targets.

    In general it is across the chips industry:

    https://usmarkettoday.com/chip-makers-expect-demand-slowdown-to-expand-beyond-pcs-smartphones/

    "The market is worse than we thought it would be," Mark Murphy, chief financial officer at memory maker Micron Technology Inc"

    https://www.youtube.com/watch?v=jKzYyD3jYSM (Bloomberg Markets and Finance Aug 10, 2022)

    In the long term the US chips industry has a long term potential to grow as recently on Tuesday President Biden signed the Chips and Science Act of 2022, directing financial assistance for the construction and expansion of semiconductor manufacturing facilities in the US to reduce dependency from other countries.

    https://www.youtube.com/watch?v=A1YghOubH4g

    What the CHIPS Act means for investors, the semiconductor industry and China Yahoo Finance Aug 9, 2022 .

    Even at the current price, their valuation I think Nvidia is still expensive (certainly, not like  for like) compared to its peer such as AMD, MU, Intel, QCom in my opinion. But they are currently leading producers of graphics hardware used in machine learning, gaming, AI and future Metaverse using 5nm. But they are still relying on TSMC to manufacture chips for them.

    In term of valuation MU (Micron Technology) is much cheaper compared to others but it is not like for like comparison as they are manufacturing different items. MU (Micron Technology) is mainly focusing on memory chips.

    Contrarian strategist are doing the opposite than the crowd, they buy good undervalued companies when not many people want it.

  • adindas
    adindas Posts: 6,813 Forumite
    First Anniversary Name Dropper First Post
    edited 11 August 2022 at 8:01AM

    Of course, everyone knows who ASML is. The US and EU have been using them as a pawn in the global chip wars for years.

    China on their own today in 2022 is already up to 7nm. Few expected it so soon. It won't be long before they get to 5nm and 3nm.

    A falling tide drags down all ships. ASML won't be immune to any chip cycle of factory oversupply and gloom.

    ASML is a quite incredible company of mind-boggling complexity. But the best time to invest was 2012, not 2022.

    The future in the 2020s and 2030s for the Western chip industry looks much tougher. A factory glut cycle, falling prices from oversupply, barriers-to-entry for premium chips lowering, brutal International sanctions that can pop up or change in a flash at any moment, fierce politicisation of raw materials, China tech fast catching up, Taiwan invasion likely before 2049 anniversary, a lot of red flags.

    Not investment advice, just a personal view. Dyor, etc.
    China can not produce 5nm Chips. No single Chinese companies could produce chips making machine using Extreme Ultraviolet Lithography (EUV). Even SMIC the largest chips manufacturer in China itself got their Machines from ASML.ASML has been told not to sell machines with Extreme Ultraviolet Lithography (EUV) to China. This will curb China capability to compete in the future.
    I agree for time to invest, the earlier is the better, but if you miss it does not mean you could not invest thereafter. It happens to all stocks, especially in all high tech companies. Just look at Apple, Amazon, Tesla, Microsoft, people invest at various different time. Stock prices increase does not matter as long a long as other valuation measure is still in your favour, profitability increasing, debt is reduced, Sales and book value is increasing which will lead to the same or even better valuation.
    All you need to do is to wait until they fall into a reasonable valuation, the price you are willing to pay before you strike. This could happen from various causes such as missing earning, bad news, political reason, etc. If it does not happen just forget it and move on to other alternatives.
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