For years Micron Technology, Inc. (MU) struggled on the stock market as both competition and demand in the personal computer (PC) market took its toll on the chip maker.
Now the company is experiencing a bit of a renaissance, and the stock has been trending higher on genuine business growth.
In my mind, if Micron Technology is experiencing improved business conditions, it’s a positive indicator for almost everything else. This $34.0-billion company has really had a tough time since the technology bubble burst in 2000.
But the position broke out strongly at the beginning of last year. In January of 2013, the stock was trading for just less than $7.00 a share. Now, it’s more than $30.00 and is in a solid uptrend.
The company’s stock chart is featured below:
Chart courtesy of www.StockCharts.com
In its most recent quarter, the company’s third fiscal quarter of 2014 (ended May 29, 2014), revenues grew 72% over the same quarter of the previous fiscal year to $3.98 billion.
Earnings were $806 million compared to $43.0 million.
Micron Technology recently acquired a Japanese chip maker, and as the company’s share price action illustrates, investors are more enthusiastic about the memory chip business.
This stock is not expensively priced, and it likely has more near-term legs in this market.
The business cycle is slowly changing, and so is investor sentiment. The semiconductor industry is notoriously volatile and boom-and-bust, but if business conditions are improving for Micron Technology, then there certainly is more optimism regarding the dynamic random access memory (DRAM) market.
Intel Corporation (INTC) recently surged on the stock market after the company raised its guidance, and this is important because its last few quarters were pretty uninspiring.
Intel is not a big growth story, but that doesn’t mean that the position can’t move. The company’s dividend yield is currently around three percent and earnings estimates have been going up across the board.
The resurgence in enthusiasm for the PC is reflected in the corporate financial results of Micron Technology and Intel. It’s most definitely worthwhile following these companies’ earnings results, and Intel in particular.
Given current information and broader market dynamics, I think both these positions can keep ticking higher throughout the bottom half of 2014.
Intel is not expensively priced, and while the stock is up almost 20% in the last month, big investors like the company’s earnings security and dividend.
There is a bit of momentum in these large-cap semiconductor manufacturers, and its reflected both operationally and on the stock market.
Improved business conditions for PCs are a noteworthy development for the broader economy.
Perhaps the best way to play this developing resurgence is through a complementary enterprise, as the semiconductor business will always be highly volatile.
Microsoft Corporation (MSFT) is a mature company that’s not expensively priced and has also been going up since the beginning of 2013. (See “How to Create a Winning Portfolio in a Market at Its Highs.”)
With a forward price-to-earnings ratio of approximately 14.6 and a 2.7% dividend yield, it’s likely that this position will keep ticking higher as well.