A caution on Micron - its convertible debt



Well, so maybe my bullishness on Micron was misplaced, or maybe the relatively new management will deal with their predecessor’s mistake.

I did some further digging, but couldn’t find how much of this debt there is, and how many shares it converts to.


Well, so maybe my bullishness on Micron was misplaced,

What follows are not Micron specific comments as I have not looked at them in years.

A main issue with Micron in “this economy” is that it is a capital intensive business while there are so many “asset light” investments to choose from. It might outperform in short runs but semiconductors are cyclical investments that require a lot of specialized knowledge of the industry. As an industry outsider I’ve not had much luck with my attempts at investing in cyclicals.

One way to lighten up the business is to use borrowed money, leverage, the idea being that the debt produces more than it costs. The problem is that debt can easily backfire, for me it is one of the red flags I look for in the Balance Sheet before investing.

Semiconductors don’t have to be asset heavy, the so called fabless ones aren’t. One of my favorites used to be ARM Holdings now bought out by Softbank.

Does Saul have an opinion on cyclicals and debt?

Denny Schlesinger

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The convertible debt is an issue, actually a big issue.

On the other hand you have industry is going crazy for memory, and it does not appear to be slowing down any time soon. Autonomous autos, data centers, Internet of Things, your homes, your appliances, all need memory, and Micron makes it. While I tend to favor software companies over hardware companies Micron makes a diversity as long as the market is this favorable for their products. Micron is printing money right now, and their PE ratio is small. You have to like that trend.