The US stock market is often described as the deepest and most liquid in the world, but hedge fund manager Mohnish Pabrai has only one US stock in his portfolio. It’s a semiconductor stock, and Pabrai explains why he likes it. After years of hitting the market again, semiconductor stocks have plummeted this year as market volatility spikes and investors shift away from growth stocks to safer bets. The iShares Semiconductor ETF, or SOXX, which tracks the performance of semiconductors, is down more than 20% this year. But Pabrai remains optimistic about Micron Technology. This veteran investor is a managing partner of the Pabrai Investment Fund and is known for adhering to Warren Buffett’s principles for value investing and capital allocation. Micron derives most of its revenue and profits from dynamic random access memory (DRAM), a type of semiconductor memory widely used in digital electronics, Pabrai told CNBC Pro Talks on Wednesday. Private. The DRAM business is a monopoly, he noted, and the three key players hold a collective market share of more than 95%. Samsung Electronics holds about half of the market share, while SK Hynix and Micron have about 25%. “The memory business used to be a terrible business because there were 15 to 20 players fighting each other, but it has changed,” says Pabrai. “It’s changed in the last few years as it’s been reduced to three reasonable players, all of whom are very interested in making a reasonable profit. None of them are really chasing market share or trying to outdo it. past the other two.” He believes that the field is already saturated and cannot attract more participants. “These are very well-protected businesses. I don’t think a fourth player can emerge in this space and I think in the long run, all of these players will do well and I think Micron has that.” can do better than the other two,” he added. Long-term potential The hedge fund manager believes the sector will also benefit from a host of major trends driving demand for chips. McKinsey & Company says the global semiconductor industry is poised for a decade of growth and is expected to become a trillion-dollar industry by 2030. According to the global consulting firm, 70% Growth is predicted by just three industries – automotive, compute and data storage, and wireless. “I think we’re in the early stages of artificial intelligence, cloud computing, self-driving cars… I think memory usage will increase dramatically in the future. [coming] “Pabrai said.” I think it’s a business worth learning. It’s going very low, you know, single digit P/E and and I think it’s going to trade significantly higher at some point,” he said. used by analysts and investors to evaluate stocks.A high P/E can mean a stock’s price is high relative to earnings and may be overvalued, conversely, a low P/E has may indicate that the current stock price is low relative to earnings.
The semiconductor is seen on a circuit board.
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The US stock market is often described as the deepest and most liquid in the world, but hedge fund manager Mohnish Pabrai has only one US stock in his portfolio. It’s a semiconductor stock, and Pabrai explains why he likes it.
