This morning before the stock market open Coca-Cola reported earnings of 69 cents a share for the third quarter. That was up from 65 cents a share in the third quarter of 2021 and was above the 64 cents a share expected by Wall Street analysts. Revenue of $11.1 billion was higher than the $10.5 billion projected by Wall Street.
I hate to do this. Taiwan Semiconductor Manufacturing (TSM) is the premier chip manufacturer in the world and I see the company continuing to grow revenue from the increasing demand for smaller and more powerful chips. And I certainly hate to sell a stock that’s down 46% for the year to date as of the close on October 18. Under ordinary circumstances, I would hold on and ride out the current slump in the semiconductor cycle. After all, we’ve been here before, right? Except that the U.S.-China trade war and the possibility that China will look for a confrontation over Taiwan make the current circumstances anything but “ordinary.”
Today I’m selling ASML Holding (ASML) out of my long-term 50 Stocks Portfolio. My take on Asmel hasn’t changed: this is one of the key chip equipment companies in the drive to produce smaller and denser chips. What has changed in the market and the global economy. I think that technology, and especially chip stocks, are in a downtrend that has a lot longer to run. And that recent U.S. restrictions on advanced chip technology exports to China will set off a trade war that will come down heavily on companies such as ASML.
If you liked the Trump administration’s trade war with China, you’ll love the Biden administration’s new, more dangerous, escalated version. Rather than slapping tariffs on Chinese goods, and inviting retaliatory tariffs by China on American products, the Biden administration war limits the same of advanced semiconductors and chip-making equipment to Chines companies. The action is aimed straight at the heart of China’s efforts to build its own chip industry. And it plays right into a belief, stoked by China’s President Xi Jinping, that China is the victim of a Western plot to prevent the country’s rise to its rightful place in the global order. And the opening blows in this trade war come just as President Xi aims to be installed as China’s newest preeminent leader with a status near that of Mao. I don’t know what the retaliation from China will be, but it is unlikely to stop with a few restrictions on how U.S. companies, such as Tesla (TSLA) and Apple (AAPL) operate in China. The situation is so dangerous because it is so uncertain and so open-ended.
After the close today October 6, Advanced Micro Devices (NASDAQ) announced that its preliminary estimate of revenue for the third quarter would be just $5.6 million. That’s well below Wall Street forecasts of $6.71 billion.
Today, October 6, I made Qualcomm the #6 Pick in my 10 Perfect Stocks Special Report. As of October 7, I will be adding Qualcomm to my long-term 50 Stocks Portfolio.
Is there such a thing as a perfect stock? Depends. Not a chance, if you mean a stock that will be perfect in every market for every time period. No way, if you mean a stock that will go up steadily from the day you buy it. Nah, if you mean a “Buy and Hold Forever Stock.” But there are stocks that are “perfect” for a specific kind of market. And there are stocks that are “perfect” for a specific holding period. And there are stocks that are “perfect” for investors with a specific portfolio goal. And in this Special Report, I’m going to give you 10 of those Perfect Picks.
Yesterday, September 29, after the close of trading DRAM chipmaker Micron Technology (MU) reported fiscal fourth-quarter earnings of $1.35 a share and adjusted earnings of $1.45 a share. That was down from $2.42 a share in adjusted earnings in the fiscal fourth quarter of 2021. Wall Street was looking for earnings of $1.37 a share. Revenue fell to $6.64 billion from $8.27 billion a year ago. Analysts had been looking for revenue of $6.73 billion. The drop in earnings and revenue was widely expected. Which is why the stock closed up 0.18% today after the earnings. You’d have to say that the big hurt from Micron’s news–and especially from its report that it would cut total capital spending by 30% year over year and spending on wafer fab equipment by 50% year over year–fell on chip equipment makers.
My one-hundred-and-ninetieth YouTube video: “Quick Pick Nvidia” went up today. This week’s Quick Pick: Nvidia (NASDAQ: NVDA). I believe Nvidia will be the dominant chip stock for the next decade–but the stock is struggling during this bear market and the shares were down 58% year-to-date as of September 26. The company has come out with a new line of chips, the GeForce RTX 4000 Series, which offers a 2-4x performance boost over the last generation chip. But in order to get that boost, early reviews indicate, a computer game has to use Nvidia’s DLSS software. Currently, almost no games use DLSS. So Nvidia finds itself in a build it and they will come situation. (“Build it, and they will come,” as James Earl Jones said in Field of Dreams.) Nvidia now awaits the uptake from companies that will be using this chip of the future. Because this product doesn’t “do anything” right now, Nvidia’s upcoming earnings on November 16 won’t reflect this new product. In the short-term, I look for the stock o sell off further on the earnings report. In other words, a better buying opportunity still awaits those who can be patient.
Apple (AAPL), which once urged suppliers to increase production of its new iPhone, is now telling them “Never mind,” according to Bloomberg. The anticipated surge in demand has failed to materialize. the company had told suppliers to increase production in the second half of the year ahead of a projected increase in iPhone sales in the second half of 2022. Now Apple is aiming to produce 90 million iPhones in the period. That’s roughly the same level as in the second half of 2021 and in line with Apple’s original forecast this summer.
Earnings forecasts are falling as we get close to the end of the quarter on September 30 and the start of earnings season in early October. Aggregate earnings per share estimate for companies in the Standard & Poor’s have dropped 5.5% in the past two months, according to Credit Suisse.
Lithium producer Albemarle (ALB) closed up 2.71% today after hitting an all-time high of $298.17 in intraday trading. The shares closed at $295.68. The gains for Albemarle, and across the lithium sector, came as Goldman Sachs upgraded lithium battery maker Freyr Battery (FREY) on projected higher demand for lithium batteries after the Inflation Reduction Act. Albemarle is a member of my Jubak Picks Portfolio where it is up 200.18% since my August 10, 2018 stock pick. The stock is also a member of my long-term 50 Stocks Portfolio where it is up 221.67% since February 17, 2017.
