We recently published a list of 15 Best Stocks to Buy According to Hosking Partners. In this article, we are going to take a look at where Micron Technology Inc (NASDAQ:MU) stands against the other best stocks to buy according to Hosking Partners.
Hosking Partners was established in 2013 by Jeremy Hosking as an independent partnership that offers a single global equity strategy. The firm appeals to investors seeking long-term returns and innovative thinking employing a capital cycle approach to investing. It has a diverse set of stocks in its portfolio that belong to a variety of industries consisting of AI, shipping, and financial services, among others. Jeremy Hosking earned an MA from the University of Cambridge, after which he served Marathon Asset Management 26 years as a founding partner and lead portfolio manager. There he contributed to developing the capital cycle approach to investment.
In its recent blog about shipping, Hosking Partners believes that understanding the cycles in different classes of shipping and global trends is essential for successful investment in the industry. Currently, Shipping (covering the container, dry bulk, product tanker and LNG sub-sectors) represents 1.25% of the portfolio. Global trade has declined as a percentage of GDP since 2010 caused by deglobalization, accelerated by the COVID-19 pandemic and geopolitical instability from the Russia-Ukraine war. This trend, coupled with the energy transition, is expected to constrain future supply and increase commodity price volatility, benefiting shipping by enabling cross-border trade.
Furthermore, shipping is a significant emitter of CO2, accounting for about 3% of global emissions. Environmental regulations aim to reduce emissions, but uncertainty over future fuel technology deters investment in new ships, leading to a tighter supply. The industry’s efficiency, measured by emissions per tonne-km, remains high compared to other transport modes. The shipping industry is at a pivotal juncture, with significant transformations driven by AI, the energy transition, and ESG considerations.
Another industry that Hosking Partners talks about is copper mining. Copper is often seen as a barometer for economic health and is crucial for the energy transition, including electric vehicles, power grids, and wind turbines. Wall Street banks are optimistic about copper prices, forecasting significant gains. Citi analysts suggest that prices could surge to over $15,000 per ton in the next 2-3 years if a strong economic recovery occurs, while their base case projects a rise to $12,000 per ton with modest demand growth through 2025 and 2026. Bank of America has also increased its 2024 copper price target to $9,321 from $8,625, citing tight mine supply and high demand driven by the energy transition as key factors.
However, some experts are cautious. Colin Hamilton of BMO Capital Markets argues that commodity markets tend to self-correct, and if supply issues persist, demand may adjust, potentially leading to lower prices. Hamilton suggests that while high price targets might be temporarily achievable, adjustments in demand could follow. The market may see a modest surplus due to increased mined supply, which is projected to grow by 4-4.5%. This is largely driven by new greenfield and brownfield projects. Despite the near-term surplus, long-term scarcity is anticipated as regulatory and political challenges in South America could impede the development of new mines.
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A close-up view of a computer motherboard with integrated semiconductor chips.
Micron Technology Inc (NASDAQ:MU)
Hosking Partners’ Stake Value: $98,559,243
Percentage of Hosking Partners’ 13F Portfolio: 3.64%
Number of Hedge Fund Holders: 120
Micron Technology, Inc. (NASDAQ:MU) originally specialized in designing and manufacturing DRAM for PCs before expanding into the NAND flash memory market. The company’s management expects to generate “several hundred million dollars” in revenue from high-bandwidth memory (HBM) in FY24 and is optimistic about earning “multiple billions of dollars” in FY25. Micron has already sold out its HBM capacity for this year and the next.
The company is now focused on increasing its market share in the HBM segment by expanding its customer base and developing more efficient HBM chips. The growth in HBM is closely linked to the rising demand for AI chips, which could drive earnings growth for Micron.
A rebound in memory prices and favorable inventory conditions have also contributed to Micron’s strong revenue performance. In Q3 2024, the company reported a 17% sequential revenue growth, reaching $6.81 billion, surpassing its guidance, driven by strong AI demand and effective execution. On June 25th, Rosenblatt Securities issued a “Buy” rating for Micron’s shares, with a price target of $225.00.
Micron Technology Inc. (NASDAQ:MU) is witnessing increased profitability due to strong demand for its memory and storage products. The company exceeded profit expectations for Q3 2024, with sales surging, and plans to increase capital expenditures to meet the growing demand. Furthermore, Micron Technology Inc (NASDAQ:MU) is investing heavily in high bandwidth memory (HBM) production that is expected to generate billions in sales by fiscal 2025 compared with just hundreds of millions in 2024.
After the earnings, Bank of America analyst Vivek Arya reiterated a Buy rating and gave a $170 price target on Micron Technology Inc (NASDAQ:MU).
“Management emphasized both CY24 and CY25 volumes are now fully sold out with pricing generally secured, providing visibility to its healthy sales and margin expansions (HBM is GM accretive),” Arya said.
ClearBridge Value Equity Strategy stated the following regarding Micron Technology, Inc. (NASDAQ:MU) in its Q2 2024 investor letter:
“Stock selection in the IT sector proved to be the largest contributor to performance, particularly driven by the strong performance of Micron Technology, Inc. (NASDAQ:MU) The company, which designs, develops, manufactures and sells memory and storage products, continued its strong performance alongside other AI beneficiaries as the anticipated demand for new and additional storage essential for housing and training large language AI models continues to grow.”
Overall MU ranks 2nd on our list of the best stocks to buy according to Hosking Partners. While we acknowledge the potential of MU as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MU but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
