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Jonathan Poland
Jonathan Poland
Articles (456)  | Author's Website |

Micron: A Reminder to Never Buy at 52-Week Highs

Since May, the stock is off 30%, giving investors a better buying space

September 13, 2018 | About:

In both March and May of this year, Micron (NASDAQ:MU) was closing in on a 52-week high, with many expecting a "break out." CNBC's Jim Cramer even said to "ride the wave of the PC comeback with stocks like Micron." The Mad Money host was tracking the return of personal computers (nope) and how that made semiconductor stocks like Micron and Nvidia look cheap.

Cramer: Ride the wave of the PC comeback with stocks like Micron from CNBC.

At the time, Hewlett Packard (HPE) was posting positive numbers, but while its stock has documented modest gains since March, Micron's stock has fallen off the cliff.

Literally nothing in the company's long-term value proposition has changed. It's still a leader in memory chips and continues to expand with a new factory in Northern Virginia where the it plans to spend $3 billion. Manassas is about 40 miles south west of Washington, D.C., putting the company close to plenty of government officials, lobbyists and contractors on Capitol Hill. The expansion is expected to create over 1,000 high-paying jobs by 2030 with the initial phase of production to be completed by fall 2019.


This will keep the company's sales and profit growing for years to come. It's earned $12 billion in the last 12 months and has net profit margins above 43%, return on equity over 52% and return on assets above 22%. Now that it's closing in on a year low, back the truck up.

The latest drop in Micron's stock was due to a Goldman Sachs analyst Mark Delaney, who cited demand weakness in both DRAM and NAND. Looking at his Tip Ranks profile, Delaney is only right about 55% of the time, and only 43% of the time with Micron ratings.

Investors should prefer to follow billionaire David Tepper (Trades, Portfolio), who's put a lot of his money on the upside potential of Micron. Of course, when a stock is sliding back below the levels it was trading when the year started, it's easy to get nervous.

Delaney went on to say, "Memory downturns usually last for several quarters and can see an acceleration in price declines, as customers delay procurement to wait for lower prices when possible, causing a snowballing effect that can lead downturns to be worse than initially anticipated by investors."

Maybe so, but that will likely mean Tepper, who already has 24.58% of his assets under management in Micron, can just buy more at a better price. The short-term voting machine is hurting shareholders right now, but the long-term weighing machine will prove that Micron has been one of the best trades for the future of technology.

Disclosure: I am not long/short Micron.

About the author:

Jonathan Poland
I used to manage money. I still publish my thoughts on stocks here on GuruFocus, mainly on big cap companies. I rarely write about stocks that I own. Thank you for reading.

Visit Jonathan Poland's Website

Rating: 5.0/5 (3 votes)



Taowave - 5 months ago    Report SPAM

Your points are well taken,but to say Never buy a stock at a 52 week high is a very biased statement that flies in the face of momentum/growth/canslim style traders.In the specific case of MU,you would have told investors not to buy MU at 14 and 18,not too mention 32. In all 3 of those scenarios the stock was consolidating and then broke out.Buying MU at 60(52 week high) with the stock ectended as much as it was would be a pure momentum buy,with the stock being highly extended with 50% and 40 percent vertical moves to the upside.

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