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Is it Still Worthy to Invest in Micron Technology (MU)?

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  • MU

Hazelton Capital Partners, an investment management firm, published its third-quarter 2021 investor letter. The portfolio declined by 7.8% at the end of the third quarter and has returned 7.0% year-to-date. By comparison, the S&P 500 returned 0.6% during the same quarter and 15.9% year-to-date. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.

Hazelton Capital Partners, in its Q3 2021 investor letter, mentioned Micron Technology, Inc. (NASDAQ: MU) and discussed its stance on the firm. Micron Technology, Inc. is a Boise, Idaho-based technology company with a $93.3 billion market capitalization. MU delivered a 10.96% return since the beginning of the year, while its 12-month returns are up by 30.16%. The stock closed at $83.42 per share on November 26, 2021.

Here is what Hazelton Capital Partners has to say about Micron Technology, Inc. in its Q3 2021 investor letter:

"It’s hard to explain how shares of Micron Technology, manufacture of DRAM and NAND semiconductor chips, can fall during a global chip shortage. In most industries, focusing on demand can give you a clear insight into what lays ahead for a company. Today, the memory and storage chip industry is no different. However, in the past, companies focused on market share led to the reckless build out of chip fabrication plants (FABs), oversupply, falling average selling prices (ASPs) of memory and storage chips, lower margins, and declining cash flows. As the industry consolidated - there are now just 3 major producers of DRAM and 5 on the NAND side - rational behavior among the key players began to take hold as competitors began focusing more on R&D. Currently, chip pricing remains cyclical although less so than in the past and that cyclicality has a long-term upward bias. The ongoing transition to newer and more robust platforms (3D 176-layer NAND & 1-Alpha node DRAM) has provided the memory and storage chip industry with improved supply capacity under its current manufacturing footprint, ultimately pressuring ASPs. Over the past three years, as most of the large platform conversions have already taken place, being able to add more bits per wafer has reached a saturation point. With no major FAB build outs planned in the near-term by competitors Samsung or SK Hynix, constrained supply and flattening cost curves should lead to durable and upward sloping ASPs once the recent volatility from the chip shortage subsides.

Currently Micron Technology trades at just 8x 2022 estimate earnings. MU is expecting growth in both DRAM and NAND not just from the supply of more chips to data centers, artificial intelligence, the auto sector, and mobile devices, but also from greater demand for gigabyte capacity per unit within those segments. With a healthy balance sheet, improving return on invested capital, and expanding cash flows, not only should Micron benefit from improving future earnings but its multiple should also reflect the transition to a flattening cost curve."

Semiconductor
Semiconductor

Photo by Yogesh Phuyal on Unsplash

Based on our calculations, Micron Technology, Inc. (NASDAQ: MU) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. MU was in 63 hedge fund portfolios at the end of the third quarter of 2021, compared to 87 funds in the previous quarter. Micron Technology, Inc. (NASDAQ: MU) delivered a 14.02% return in the past 3 months.

Disclosure: None. This article is originally published at Insider Monkey.