Hi Multis
This is unusual, as this Overview Of The Week is just the first article you get from me.
As I wrote last week, my 50th birthday was this week, so I took time to celebrate with my loved ones.
Then on Thursday evening, I spoke at an event in Ghent. Here’s a picture I took ten minutes before it started (so people were still coming in).
There were 500 people and it was great to see some Multis were there as well and came to say hi to me.
On Friday morning, at 5 am, my cab took me from the hotel in Ghent to the train station to take the train to Bonn. I was on the train at 5.21 am.
For the people who think my heart rate is quite high: I had to climb stairs with a bag and a suitcase. :-)
I am writing this on Sunday, on my way back home. Friday and Saturday, I attended a conference in Bonn I didn’t want to miss: the Financial Marketing Summit, where I met people who do the same thing I do, although I was a tiny player compared to everyone else. I thoroughly enjoyed it. I was there with my friend Pieter Slegers from Compounding Quality.
That doesn’t mean I didn’t do any writing. I wrote the second article about one of the new picks. I still have to edit it, but you can expect the article tomorrow.
Memes Of The Week
When markets are doing badly, the meme harvest is much bigger. It’s like rain for the crops. No memes this week.
Interesting Podcasts Or Books
I was so busy this week that I didn’t even listen to podcasts. I bought a new book, after a tip at the conference in Bonn. It’s called Return to Real: The Last Human Advantage In An Age of Artificial Everything.
As you can see, it’s from Ryan Levesque. I have read his books Choose and Ask, and I liked both of them a lot. So, I’m looking forward to reading this one!
But I can say the same about the next book, Stock Picker: How to Develop the Mindset, Temperament, and Strategy to Outperform Wall Street by Ian Cassel.
I had preordered the book and it finally arrived this week. Ian Cassel is an investor specialized in small caps, but I think you can learn from all angles of investing. I heard from multiple people that this book is outstanding.
The markets in the past week
So, what did the markets do this week? Because of my busy schedule, I feel like I don't know as well as I do in other weeks. Let's have a look.
As you can see, the S&P 5As you can see, the S&P 500 was down 0.27%, the Russell 2000 0.16% but the Nasdaq was up 0.45%.
Nvidia was up almost 4% this week and it has a bigger weight in the Nasdaq than in the S&P 500.
The Greed & Fear Index dropped deeper into FEAR territory, from 37 last week to 31 this week.
Quick Facts
1. Micron’s earnings
Micron (MU) reported its earnings this week. It was another jaw-dropping quarter, but the stock didn’t move.
Revenue was up an incredible 379% YoY, to $54.23B. Adjusted EPS came in at $33.42, up a whopping 11x YoY. That’s nuts
This was Micron’s fiscal Q4, so that means that its fiscal year was also closed. Revenue for the year rocketed from $37.38B last year to $133.19 billion in the last four quarters, up 3.5x. Non-GAAP net income reached $86.76 billion, and operating cash flow skyrocketed to $89.68 billion from $17.53 billion a year earlier.
For fiscal Q1 2027, management expects revenue of about $61.5B, well above the consensus of $57.9 billion. Adjusted EPS is guided to be $38.15, versus the consensus of $35.9.
So, why didn’t the stock price jump after such blow-out results and guidance? The problem is the same for many chip stocks. Investors are afraid of the cycle. Especially memory chips, the ones Micron makes, have been notably cyclical.
But I think these cycles will become at least less extreme. Micron announced that it now has 26 SCAs (Strategic Customer Agreements), up from 16 last quarter. These deals bring in more than 35% of expected revenue in 2030. Some even run until 2031. 75% of the SCAs have fixed price brackets.
Micron already has 75% of its 2027 in commitments, which is extremely high. RPO, or remaining performance obligations, are now at $150 billion.
That is a big change for a business that couldn’t see into the future very well and just had to follow the cycles.
A second reason for the low enthusiasm for the stock after the earnings may be Micron’s capex plans. The company wants to invest more than $50B in the next twelve months. Normally, investors see that as the start of the supply glut.
But when you listen to what management says, a big part of that money is meant for building cleanrooms. Micron can build those first and install the expensive production machines later. It can decide based on the demand. That gives it more flexibility and reduces the risk of adding too much supply too fast.
HBM, or high-bandwidth memory, is a special way of packaging and connecting DRAM chips for very high bandwidth. Demand is incredible, which means it often gets priority over standard DRAM chips, which are also in high demand. This means Micron has pricing power.
You can see that in Micron’s numbers. DRAM revenue rose 27% QoQ, but shipments increased only in the mid-single digits. NAND revenue rose 42% QoQ, while shipments increased around 10%. In other words, the big jump in revenue came mostly from pricing power. This is the third reason why the market didn’t push Micron’s stock higher. Because that pricing power is also seen as a risk once demand and supply are more in balance.
But for now, Micron’s management doesn’t see that balance on the horizon. It expects even more imbalance in 2027 and 2028. Customers already try to make sure they have what they want for 2028.
This also means that Micron also has a much stronger balance sheet than in past cycles. Cash and investments reached $73.5 billion against just $5.2 billion of debt. Management has said that it will return more of that cash to shareholders.
I think that the valuation of the stock is attractive.
As you see, the consensus is still very bullish for the next year. But the market worries about what comes after 2027 and especially 2028. I think a lot of the negative news is already baked into the price at this moment and that the cycle may last longer than most think.
2. Results Presidential Election Brazil
As you may know, Brazil held elections today (Sunday). In the official polls, it was a close race, but the betting stats showed that Bolsonaro had a higher chance of winning.
98% of the votes have been counted; Flávio Bolsonaro leads with about 47.2–47.3%, while current President Luiz Inácio Lula da Silva has about 44.9%. That means there will be a second round on October 25, since one candidate must have over 50%. Of course, Flávio Bolsonaro is thought to win that second round.
If you wonder why I share this, Bolsonaro is seen as more business-friendly, which is good for Nu and Mercado Libre. The Brazil ETF is up 7% in overnight trading.
More important for us: Nu Holdings (NU) is also up more than 7% in overnight trading.
Mercado Libre was up about 3% so far.
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