Wednesday, June 24, 2015

Added Micron to portfolio

I recently added Micron to our portfolio. General thesis behind that stock is the same as with Western Digital: amount of data in the world is growing exponentially and will keep on doing that for many years to come.

All that data will be stored on the fly to volatile memory and then for permanent storage to hard disk drive or non-volatile memory (solid state drive or non-volatile memory chips inside device). Micron makes both memory chips (of volatile and non-volatile kind) as well as solid state drives (which essentially come down to bunch of non-volatile memory chips).

The amount of memory chip manufacturers have come down over the years similarly to hard disk drive providers. This should make the overall playing field more healthy as there are less players going for crazy price points at expense of profitability.

It can be also foreseen that every major step in technical advance will increase the "moat" of dominant players i.e. create barrier of entry and makes sure only the very big ones can stay on the leading edge. As with all technology, most profits are made on that edge.

There are many things that have pointed to Micron as a potentially good position. Micron has popped up in my screens as value play. Intel and Micron are collaborating on 3D NAND Flash memory technology, which may get them market share boost in this space.

What also has caught my eye is that David Einhorn has a very big position in Micron (he is one of the value oriented money managers I follow).

Finally, Micron serves as hedge to our position in Western Digital. Transition to solid state drives has not been as fast as many predicted years ago, but it's there as a trend and threat to hard disk drive manufacturers.

We have positions in Micron, Western Digital and Intel.

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