Micron Technology (MU, Financial) was founded in Boise, Idaho and manufacturers and markets a basic commodity for the computer industry –Â DRAM, NAND Flash memory, CMOS image sensors, along with other semiconductor components. was founded in Boise, Idaho and incorporated in October 1978.
From a consistency standpoint, Micron fails to deliver, but you don’t get paid based on the past. In the last five years, Micron has worked hard to improve margins and efficency. It has doubled revenue, increased both gross and operating margins and has built a great base of relationships to drive the company forward for years to come.
2010 Figures
Revenue: $8.4 billion
Profits: $1.8 billion
Book: $8.07
ROE: 29%
2015 (TTM)
Revenue: $16.9 billion
Profits: $3.9 billion
Book: $11.49
ROE: 35%
Recently, the company renegotiated a lower price point with its top DRAM supplier which could save them north of $100 million per quarter. Plus, MU will be releasing its first TLC product in the next quarter. TLC flash (triple level cell) is a type of solid-state NAND flash memory that stores three bits of data per cell of flash media. TLC flash is less expensive than single-level cell (SLC) and multi-level cell (MLC) solid-state flash memory, which makes it appealing for consumer devices that use solid-state storage.
Content is crushing storage. Every minute, the following occurs:
Google receives over 4 million search queries
Facebook users share north of 3 million pieces of content.
Twitter users tweet out 300,000+ times.
Instagram users post 220,000+ new photos.
YouTube users upload 72 hours of new video.
Apple users download 50,000+ apps.
Email users send over 200 million messages.
Storage and memory will be necessary to power the future of technological growth and Micron will one of the company’s in the drivers seat. At least that’s what I can deduce from the big positions taken in the stock by David Einhorn (Trades, Portfolio), David Tepper (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Seth Klarman (Trades, Portfolio), and Donald Smith (Trades, Portfolio). Collectively, their funds own north of 75 million shares.
As for the stock, at the current price point, it’s off 17% from the latest buys from Tepper, Einhorn, Greenblatt and Robertson. It is also interesting to note that both Smith and Klarman, who have held on the longest, reduced their positions at the end of the year but not since.
Let’s estimate that MU can get its net income up to $5 billion in the next few years, which is very likely given the current moves by management to further cost efficiencies. At 10x the stock would be worth double. At 15x, triple. I think that’s what these gurus all see and why they’ve held on and bought more despite the 30% drop in the last six months.
To be successful, you have to look for companies that can produce a better than market rate of interest. Under $25, MU may not be a long term hold, but it's definitely a bargain!
