Analog Devices (ADI) Targets Doubling Its EPS in 5 Years

Giverny Capital Asset Management LLC recently published its second quarter investor letter 2022, which can be downloaded here.  The fund’s model portfolio returns declined by 18.48% net of fees in the second quarter of 2022. Current events in the market have influenced the stocks’ short-term prices. The fund generated an annualized return of 17.02% over the last nine quarters, net of fees. You can check the top 5 holdings of the fund to see its best picks for 2022.

In the second quarter 2022 letter, Giverny Capital Asset Management discussed the performance of its portfolios over the last few years. Analog Devices, Inc. (NASDAQ:ADI) is a leading semiconductor chip provider and has a market capitalization of $89.386 billion.  The stock of Analog Devices, Inc. (NASDAQ:ADI) closed at $171.96 per share on July 29, 2022. Last month, the return of Analog Devices, Inc. (NASDAQ:ADI) rose to 20.33%, whereas its 12-month return is 2.71%.

Here is what Giverny Capital Asset Management specifically said about Analog Devices, Inc. (NASDAQ:ADI) :

“Analog Devices, Inc. (NASDAQ:ADI) is one of two globally dominant providers of analog semiconductor chips (Texas Instruments is the other). These low-cost chips are the lifeblood of nearly all the electronics we use, from conventional and electric cars to PCs to appliances to industrial equipment. ADI sells 75,000 different chips, most of them costing less than $1. It employs more than 10,000 engineers and spends $1.7 billion a year on research & development but does not rely on a single line of products for its revenue. The business is extremely sticky, as analog chips tend to be designed into products and never replaced. About half of ADI’s revenue comes from products more than 10 years old. It would be very tough for a new entrant to succeed here, as there is no one dominant customer segment, the products are very low cost yet require R&D and engineering know-how, and there is no incentive to replace an inexpensive chip that works.

ADI recently guided to earnings per share doubling over the next five years, to $15, roughly a mid-teens growth rate. The growth of electric cars, 5G wireless networks, industrial automation equipment and power storage all will require more analog chips. ADI continues to tell investors that it has more orders than it can supply. We paid $162 for shares.”

Photo by Yogesh Phuyal on Unsplash

Our research shows that Analog Devices, Inc. (NASDAQ:ADI)  isn’t on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database 67 hedge fund portfolios held Analog Devices, Inc. (NASDAQ:ADI)  at the end of the first quarter which was 72  in the previous quarter. Analog Devices, Inc. (NASDAQ:ADI) shares gained 3.25% of their value over the last 52 weeks.

Analog Devices, Inc. (NASDAQ:ADI) is a popular stock among hedge funds, as we discussed in another article last month. If you want to read more investor letters from hedge funds and other leading investors, check out our hedge fund investor letters Q2 2022 page.

Disclosure: None. This article is originally published at Insider Monkey.