What to Buy Now

Investment Analysis Clubs Saul’s Investing Discussions
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On the NPI board I did an NCAA like tournament structure, but had more rounds, pitting stock after stock. In the end the finals came down to Square and Mongo. And as I look at the landscape we presently are in, and as I look at the competitive landscape in the world, with growth opportunities, I have to say that our collective wisdom ended up making some very wise choices.

Square tied Mongo in the end for #1. Given the current situation, both are also very ripe for buying at this point in time.

Wisdom in crowds if properly focused.

I make no guarantees of course, but if one runs through he arguments, I do think that Square and Mongo stand out as the two you might want to first look at now.

Tinker

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I’ll add my vote to those.

I think SQ is the most urgent - it is on crazy sale today because of the not-really-relevant news of the CFO leaving exacerbating the tech drop. It’s down 33% from its highs, and I think it’ll bounce back after its crazy good number last quarter.

I think it’s always a good time to buy Mongo, but even better when it is 25% off its highs.

I would add PVTL as one more, though it isn’t verified by the wisdom of the crowds - it’s back at its just post-IPO price and 45% off its highs. This is a crazy fast growing company and a tool maker to the cloud that didn’t deserve this haircut.

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SW, I have mostly stopped announcing what I do these days, at least in real time. With Square however, I had to do it. I concur with you and although I really just learned about the current Square (as a merchant I had the earlier Square iPhone doggle - really bad, it would take a dozen swipes sometimes to get it to work, and it would approve fewer cards than my First Data account) with the poll, I am a quick learner. Yeah, I had to buy a lot.

As stated previously on another board - compassion people, I could be wrong and Square might fall apart without their current CFO…well, Apple did not with Jobs, and Microsoft did not with Gates, I think Square will survive.

We do anchor a lot on price sometimes, but in this case, although Square is not cheap, it is “cheap” and I think we understand the nuance and distinction between the two of them. And it is so for reasons, at 6x normal volume on two consecutive days, in excess to the market crash, for reasons that have no material reality as it affects the fundamentals of the company. If the company only works because of one person, then it is not much of a company.

Tinker

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I think SQ is the most urgent - it is on crazy sale today because of the not-really-relevant news of the CFO leaving exacerbating the tech drop. It’s down 33% from its highs, and I think it’ll bounce back after its crazy good number last quarter.

I would strongly caution against price anchoring like this. Square may be a great stock from here, but this is not a “crazy sale” and it is certainly not an “urgent” buy, whatever that could mean.

Look folks, we have to acknowledge that SQ had gotten extremely expensive. It first hit $70 two or three months ago. It’s not a bargain basement stock at $70 today.

I’m not saying don’t buy. But there are plenty of things to buy. I guess I would say other things might be more of a bargain, but I don’t really know. I like and own SQ.

Just remember too much conviction can be dangerous.

Bear

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I read your post a few days ago about your conviction buys. They were ~5 to 10% higher…
If you are talking about high valuations then none of the stocks talked about here are good buys now since they are all still very expensive on traditional norms. They all have run up a great deal over the past months.

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@Bear

I would strongly caution against price anchoring like this. Square may be a great stock from here, but this is not a “crazy sale” and it is certainly not an “urgent” buy, whatever that could mean.

Bear - I think you got me here. I do tend to price anchor on big drops - like my wife buying things “on sale”. I get excited when the market falls, go through my watch list and get my cheque book out.

My real reason I think SQ is a screaming buy is not the price drop in the last 2 days - all the companies are pulling back and you’d expect a high flyer like SQ to pull back as people take profits. It is the drop this morning on (what I consider) relatively irrelevant news - the Sarah Friar leaving to take a CEO position. This additional 10% drop on 5x normal volume seems to me a clear over reaction - and it is easy to guess what is happening. One or more very large investors decided to trim or drop SQ more than other tech stocks, since there was a 2nd source of uncertainty.

Now it could happen that Sarah left for some nefarious reason - in which case this is just the start of the pain. But it seems much more likely that there will be a much stronger snap back of the price of this stock compared to most tech stocks, once it becomes clear that there isn’t really any significant risk to the company in the change of CFO. It is to take advantage of this temporary mispricing that I bought Dec $70 calls. I’m perfectly happy to have a long term investment in SQ stock, but I’ll put a stake in the sand and say that in the next 2 months the stock is going to snap back way faster than other tech stocks, which will give me a big option gain also.

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I came to the same conclusion without reading your round robin. As I’m already overboard with SQ, Mongo is my pick, now what to sell in order to get the cash to buy more MDB . . .

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I’ll mention Micron (MU) again. The shares are an absolute bargain! The financial metrics are superb. The company is out of favor at present, but it will rebound.

Conventional wisdom has it that Micron is a piddling commodity play in memory chips. But that thinking is soooo 2014. The market for memory chips keeps growing. Memory demand will expand exponentially in the coming years. There’s the 5G cycle starting next year with an explosion of IoT applications. They’ll all need lots of memory to function. Then there’s the growing demand for Nvidia graphics cards for AI applications and autonomous driving. What’s rarely mentioned is that these cards come replete with memory chips. They are critical in this application (made by Micron and Samsung). The future looks mighty bright.

Sure, Micron has suffered from all the tariff brouhaha. That’s why the shares are on sale. I can’t predict how the dust will settle, but I know it WILL settle.

Here are the financial statistics:

https://finance.yahoo.com/quote/MU/key-statistics?p=MU

Forward P/E = 4.27!
Revenue Growth > 30%!
PEG Ratio (5 yr expected)= 0.16 (yes, you read that right)
Price/Sales (ttm) = 1.60
Profit Margin = 46.51%
Return on Equity (ttm) = 53.72%
Diluted EPS (ttm) = 11.51
Quarterly Earnings Growth (yoy) = 82.60%

To this I’ll add that Micron has committed to a $10 Billion share buyback program (approx. 18% of the float). The program has already begun.

Finally, let’s circle back to the AI opportunity (from Barrons):

https://finance.yahoo.com/m/89bf3313-a411-3475-817e-627b7c83…

The chip maker is seeing a stream of upbeat analyst comments a day after a presentation on the role memory plays in artificial intelligence.

“We conclude that AI is truly at its early stages with a long runway for growth and we expect the demand for memory and storage to accelerate as AI workloads proliferate,” wrote JPMorgan analyst Harlan Sur. He added that Micron is using AI within its factories to improve yield and output, which is a less obvious way the company stands to benefit from the technology.

Sur has an Overweight rating and $75 target on the shares.

Cowen analyst Karl Ackerman commented that Micron appears “uniquely positioned” to capitalize on the trend because of it touches all types of memory technologies, including DRAM, NAND, NOR, and storage-class memory.

I’ve been buying as many shares as my wallet can bear during this market correction. I may not see a spike higher (then again, I might). No matter, I’m in this for the long haul.

(by the way, my heavily laden ENPH/MU portfolion grew > 3.5% today)

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Is anyone considering FTNT? I started to do a more detailed analysis yesterday to post - “maybe this is a good time to buy FTNT?”. However, I got sidetracked and won’t get back to it for a bit.

FTNT was a SA recommendation sometime back. FEYE also was a SA recommendation in the same timeframe. Both are in cybersecurity. The are competitors. They both compete with larger companies like Cisco, Symantec, etc, and the larger companies certainly have greater name recognition and market share.

All that said, for whatever reason (certainly not well thought-out back then), I ended up buying a small position in FTNT and did not buy FEYE. FEYE plummeted (no idea why, as I didn’t dig in back then). In contrast, FTNT has turned in to a nice position for me.

I was starting to dig in to the financials of FTNT yesterday and wanted to try to gain some perspective as to why it has done relatively well when FEYE has not done as well. Is this of interest to anyone? If so, I’ll prioritize to get back to it. If not, … Moving on.

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I was beginning to think I was the only one left on the board still optimistic about MU. I don’t see this taking back off anytime soon necessarily but I feel it would still be under valued even at double the current share price. Everyone reverts back to the industry being “cyclical” but I just don’t buy it. Not with the explosion we’re seeing in IOT, AI, etc. I know chips are everywhere compared to 20 or 30 years ago but I still feel like there are huge untapped markets to come and many advancements still to be made.

I’ve been holding about 20% cash and really torn between adding to MU at this level, or starting a position in SQ.

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I own a small position due to the Fool recommendation and would be interested in your deep-dive. I have considered adding to this position, but haven’t had the time to evaluate further.

Thanks
John

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I’ve been holding about 20% cash and really torn between adding to MU at this level, or starting a position in SQ.

Why not do both if you’ve got 20% cash and wanting to deploy some of that?

I’ve added to both of those names in the past few days, multiple times, actually, as I, too, have more cash than I want to currently be holding, so I’ve deployed a bunch in the past 2-3 days!

All depends on your particular situation, but I think you’ll be happy with both in a few years time.

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If there was any stock that had more written about it than MU on SeekingAlpha, I wouldn’t believe it. Micron is a battleground stock if there ever was one. One side viciously claims the ultra-low P/E makes it a screaming buy, while the other side claims as voraciously that we’ve already hit the peak and are heading into a cyclical trough, so P/E doesn’t even matter. Somewhere in the middle is the truth… but heck if I know.

What I do know is that Micron isn’t going to budge until the larger institutions “allow” it to do so. They seem hell-bent on being convinced that it is purely cyclical (and to some extent, it may be, in parts). I have a larger than usual position already, so not likely to add, but I am watching closely, and holding as they enter the $10B (yes, billion) buyback.

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