I'm not keen on chasing semis here, but think this earnings season has strengthened the case for targeting moderately-priced names with high GMs and good exposure to secular growth areas (auto, industrial, cloud, etc.) following selloffs.
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Eric Jhonsa
@EricJhonsa
Tech L/S investor. I write columns (bit.ly/3etQznf) and live-blog earnings (bit.ly/2YVU03l). Occasional hiker and photographer. DMs open.
Phoenix, AZJoined May 2012
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A few comments that stood out from $ON's call. Much like some other semis that have shrugged off light Q1 sales guides, cyclical expectations/multiples loom large here.
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Speculators madly bidding up and buying calls in stocks that have "AI" or "quantum" in their names (even as yields surge and the Nasdaq comes under pressure) feels like another sign this year's rally has gotten long in the tooth.
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Not sure how long I'll stay at these levels, but I' currently the most net short I've been since early 2022.
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I wrote about why (between inflation, the Fed, a mixed earnings season and a fresh bout of short-squeezes and YOLO action) this year's tech rally is looking pretty overextended.
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I think Powell has done a decent job overall since Nov. 2021, but also think he miscalculated a bit yesterday. Both in terms of how markets would react to his comments and by giving the impression the Fed is no longer worried about non-labor/services inflation.
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This is about as far as the squeeze goes (I think/hope).
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Apparently Powell's water wasn't cold enough🤷♂️. Think markets are misjudging some things, but perhaps nothing outside of additional hot inflation data will convince some investors that the cheap-money era won't be back for a while.
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Today and Friday have been good reminders that crazy short-term action can get crazier -- particularly when shorts with poor risk management are getting blown out of positions. Think Powell has an incentive or three to throw cold water on markets tomorrow.
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$INTC is guiding (at the midpoint) for its Q1 revenue to be down 45%, and its non-GAAP GM to be down 23.1 percentage points, relative to Q1 2020 levels. Pretty incredible stuff.
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And with semis having been hit hard across the board last year, I think it makes more sense to target reasonably-priced names with good exposure to secular growth areas (auto, industrial, cloud, foundry/logic WFE) on pullbacks than to fixate on where a firm is in the cycle.
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A few comments that stood out from $MSFT's call. Suspect that (given how they can take share with firms that are looking for a cheaper solution and/or to consolidate vendors) they're seeing less of a slowdown than some SaaS peers.
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Bernstein: "[Intel knows] the channel is full, but seem to have decided that if there are parts on the shelf it might as well be their parts...Naturally this will hurt Intel as well, but as their economics are already in free fall perhaps they don't care as much anymore." Ouch.
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One trading change I've made relative to July/August is to focus trims to the long book on high-beta and longer-duration stuff that (even if I not all that expensive) is prone to moving lower with expensive stuff when markets turn. Have to accept correlation for what it is.
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I'm around 43/57 long/short now. As was the case in July/August, recent action makes me think the market isn't done giving out some hard lessons.
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Buffett's old "Be greedy when others are fearful..." line is simple advice. But having the temperament to stay true to it (even when markets see extreme action) does much to put the odds in one's favor relative to the median investor.
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I still find it kind of surreal just how much more bullish investors collectively become when stocks are surging, and vice versa. It's the opposite of how I instinctively react to market action and moves in individual stocks.
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When a list of top tech gainers looks like this for the first couple of days of a rally, it's understandable (short-covering, positioning, etc.). But when it looks like this on up days 2 weeks later, it's a 🚩.
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This, together with huge compute/memory needs for AI, video and IaaS investments, is likely to keep driving cloud capex-intensity (and with it, semi consumption) higher in the coming years, even if there are some digestion periods.
nextplatform.com/2023/01/18/wha
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This is one more reason (along with Fed hawkishness, labor tightness, China reopening, etc.) to be careful with bonds right now (particularly longer-dated stuff). The chasing that's gone on brings to mind what happened with energy/commodities last spring.
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This is a good read for anyone with a position (long or short) in a quantum computing stock. Intriguing tech, but large-scale commercial use still appears to be a ways away, and there's a ton of competition (including from major tech companies).
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Mizuho says its checks suggest $ON might be gaining SiC share at Tesla as its South Korean SiC fab ramps.
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Think patience is key as markets finally correct. A lot of expensive and speculative stocks/assets are still up a lot just over the last week. Suspect we'll need more selling in them before the correction is over.
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I'm back to being slightly net short.
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More than 3 months later, markets still have the same problem. A lot of investors just can't help themselves after so many years of cheap-money Fed policies.
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I think a key issue with the market has been that (even if they start with saner action) rallies have inevitably led YOLO traders, growth-at-any-price types and Fed-pivot truthers to run wild again. Might need some real capitulation among such investors for a bottom to form.
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A few slides that stand out from Morgan Stanley's Q4 CIO survey report. IT spending growth is slowing, but not collapsing, with security software and IaaS remaining priority areas.
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I wrote about the investing takeaways I drew from CES this year (among them: IoT device growth is an important long-term positive for major analog/MCU suppliers and public clouds, and AR and VR both still feel like works-in-progress).
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