Compounders that are recognized by the market as such tend to not be available at attractive prices (see Costco). In time the market will recognize the thesis pabrai has offered. But just as Buffett and munger bought banks at the height of the GFC, taking a position in a very capital intensive, heretofore cyclical business as we enter a recession requires conviction in your thesis. The valuation is very attractive. The runway is long. The secular tailwinds are massive. Patience and volatility tolerance are required to hold this security.

@investingiq

Жыл бұрын

Completely agree. As it falls lower it gets more and more attractive too!

I'd love you to do a full stock analysis!

@investingiq

Жыл бұрын

Hey Paul, for Micron or just in general? :)

@paulvarcoe8536

Жыл бұрын

@@investingiq Micron please

Amazing KZread channel. Thanks for your videos.

@investingiq

Жыл бұрын

Thank you Tymur :)

You do a great job on your channel. I have great respect for Pabrai, but I have to disagree with him on how to think about Micron. Pabrai says to think of Micron as a toll road to the internet. That's a poor analogy -- a more apt analogy is to think of Micron as the company that sells cement to the companies that own the toll roads to the internet. Yes, those companies that own the toll roads constantly need cement. Sometimes just for repairs on existing roads, sometimes for new road projects. When cement supplies are in abundance, and they're not building new roads, their need for new cement falls. When a flood of extra demand for roadways appears, and cement reserves are low, they make huge orders of cement for new roads and orders explode. Yes, the toll companies see fluctuations in the amount of traffic on the roads, so there's variability to their income from tolls. But for the cement company, there is much greater variability. Micron is not the owner of the toll road, they are the company that is the recipient of the CapEx spent by the owners of the toll roads.

@investingiq

Жыл бұрын

Thanks mate! That's a really interesting analogy, and I think it's pretty spot on. I'd love to know his and Li Lu's full thesis for Micron but unfortunately we won't know until he sells. This is just speculation, but I thought it might be more of a short term hold (less than 10years) for Pabrai, as he invested in Micron before he had his 'renaissance' moment and switched to more of a Munger/Sleep approach, and before that he was more of a Graham style investor flipping 50c dollars. Maybe he's betting that there'll be a cement boom for the next 5-10years and Micron will one of the main benefactors, and after that he might sell. I don't think it's a really long term hold for either of them based on the quality of the business.. but as a short term value play (5-10years), it could be a good bet.

I really Loved this channel..tqs for giving valuable content..

@investingiq

Жыл бұрын

Thank you for watching :)

I like your spinning cactus. Classy.

@investingiq

Жыл бұрын

Thanks Jim :)

Your channel deserves so much more attention. Thank you for the analysis.

@investingiq

Жыл бұрын

Thank you so much! I really appreciate that :) thank you for watching.

I’ve been thinking about investing in MU, but what stops me is the puny dividend. Why is it there? It’s so tiny! It better be growing fast.

@investingiq

Жыл бұрын

Yeah it's a bit annoying, personally I'd much prefer the management use the money for buybacks if there are no reinvestment opportunities.. Are you a dividend investor? :)

Sorry but your thesis for Micron doesn't hold up. You were absolutely right on a few points - barrier to entry due to high capital requirements, another barrier is intellectual property. You're also right about the lousy return, poor return on incremental capital, not a compounder. You're right about rapidly changing tech (I worked many years in the industry). Just because something has high barriers to entry doesn't mean it can't go belly up. I don't doubt that Micron could double or triple in the next few years, as could bitcoin. It could also do the opposite. When you say you're going to be keeping an eye on micron, what exactly are you going to be watching for?

@investingiq

Жыл бұрын

Well first things first, I'm keeping an eye on the price to see how discounted it can get. It may not be a 'great' business, but if it became cheap enough it could be a great investment in a 5-10yr horizon. The price is also crashing for no reason which makes it interesting, so if it fell to 40's it would be like a PE of 4 for a business that's shown itself to be able to stay in the game and outlast smaller competitors. I feel like the memory business is growing consistently, with so many new segments needing high performance memory (Auto, Data Centre etc), that all 3 players will do well over the next decade. Would you agree that although it's not the best industry, Micron has been pretty durable? You're absolutely right, it's not a business I'd normally go for, but in this case the 'cheapness' got my attention, along with the fact that 4 of my favourite investors like the business. I'm not done yet though and I'm still learning about all the products so I can understand who makes the best product in each category. What's your thoughts mate? You seem to have a strong understanding of the industry? :)

@bluegtturbo

Жыл бұрын

@@investingiq My concern is the lack of predictible earnings. It certainly isn't a Buffett type stock from this perspective. The semiconductor industry is notorious for its boom to bust cycles. I like to own parts of businesses that let me sleep at night. I provisionally consider Intel a much sounder proposition at a forward PE of about 9, but I'd need to research it more. I guess if you're looking for a Graham style punt then you could do a lot worse than Micron, but you'll need to either accept the roller coaster nature of it's stock price or just stick it in the bottom drawer and forget about it. I know we all aspire to have a stoical attitude to stock fluctuations, but that's a lot easier said than done...I too was drawn to it when I saw it was endorsed by Munger and on the 13F of Mobrai and LiLu, so maybe I'm missing something.

@investingiq

Жыл бұрын

@@bluegtturbo yeah I do agree with your take, their free cash flow is all over the place and its certainly not as predictable.. to me anyway. Although I'm not as familiar with their products as I am for CPUs/GPUs. I guess I was also looking at it from a Graham style perspective and looking for something that might do well in the short term if the overall market kept falling. Sort of cloning early Nick Sleep and doing well buying 50c dollars during dot com era. I agree about Intel, it's something I've thought about myself but I'm unsure on their management and their ability to execute. They have the resources to throw billions on new fabs and processes but are still behind AMD/TSMC. I like the pure value play but I guess I'm not confident in their ability to deliver.

@bluegtturbo

Жыл бұрын

@@investingiq If you're looking at following superinvestors, I'd say Berkshire is a much safer bet at current prices than is Micron. It has a collection of stocks and wholly owned businesses with excellent return on capital and equity, and brimming with compounders. I feel the risk reward ratio is much more favourable. I know a lot of people worry that berkshire struggles to find new opportunities because of its sheer size. It doesn't trouble me because that vast mountain of cash that keeps rolling in can be used for share buy backs so giving investors a bigger slice of an ever expanding pie.

He sold his position.

I believe he sold his position

@investingiq

Жыл бұрын

What makes you say that? We'll find out soon anyway with the 13fs :)

@justinbeghly1384

Жыл бұрын

@@investingiq Yes, we will. He suddenly won't talk about his MU position in a recent interview