As 2012 was drawing to a close, I’d expected certain stocks to outperform the market in 2013 and had covered them in a series of articles last December. When I reviewed some of my picks at the end of the first calendar quarter of 2013, I found that some had exceeded my expectations while some hadn’t.
However, those which hadn’t done well bounced back in Q2 and I expect them to sustain their momentum. But, what about my winning picks? Did they continue winning or lost steam? The following table will make everything crystal clear.
| Company | 1Q Returns | Half-yearly Returns |
|---|---|---|
| Micron Technology, Inc. (NASDAQ:MU) | 62.71% | 133.77% |
| Cree, Inc. (NASDAQ:CREE) | 64.79% | 92.26% |
| Giant Interactive Group Inc (ADR) (NYSE:GA) | 20.82% | 48.88% |
Stock price data (from Dec. 31, 2012 to June, 28, 2013) taken from Google Finance
Quite clearly, winners continued winning, and in my opinion, they’ll continue to be winners going forward as well. While the returns so far have been astronomical, it would make sense for investors to stick to these stocks and enjoy further gains. Let’s see how these stocks can still deliver even after their solid run up.
When Micron doesn’t mean small
Memory maker Micron Technology, Inc. (NASDAQ:MU) was already up impressively in Q1, but its second-quarter performance turned out to be even better. Two outstanding earnings reports and improving trends in NAND and DRAM pricing have ensured that Micron doesn’t lose steam. And going forward, I expect an even better performance from Micron Technology, Inc. (NASDAQ:MU).
Price of Dynamic Random Access Memory (DRAM) has gone from strength to strength this year despite falling sales of PCs as memory makers have cut down on production to support prices. This has led to terrific gross margin improvement at Micron as the metric improved an impressive six percentage points in the previous quarter and helped the company turn in a profit on an adjusted basis.
The great thing is that this upward trend in pricing is expected to continue. Micron Technology, Inc. (NASDAQ:MU) expects DRAM prices to jump in mid to high single-digits in the current quarter, and the trend should continue going forward as well since memory makers are keeping supply under control.
Throw in the strong demand for mobile DRAM on the back of higher smartphone and tablet shipments and things would look rosier. Moreover, Micron has reduced its reliance on the non-PC DRAM business as shipments to this segment are now just half of the total bit shipments, and this ratio should tilt further in favor of non-PC sales as more mobile devices would require more DRAM.
Mobile isn’t driving just DRAM; it is also pushing up the performance of Micron’s NAND business. Add to it the proliferation of solid-state drives and Micron has another area to grow. Also, Micron Technology, Inc. (NASDAQ:MU) is on the verge of acquiring bankrupt Japanese memory maker Elpida and once this is done, Apple Inc. (NASDAQ:AAPL) will become an important Micron customer as Elpida had supplied DRAM to the iPhone 5. Probably, addition of a cheaper iPhone will be another driver for Micron as it would increase its addressable market.
With all these exciting developments and continuously improving industry fundamentals, Micron Technology, Inc. (NASDAQ:MU) should continue to be a winner.
A lightning run
Frankly speaking, I hadn’t expected light-emitting diode (LED) maker Cree, Inc. (NASDAQ:CREE) to appreciate so much this year as it was already trading at a rich valuation at the end of 2012. But, when you’re in a booming industry, valuation metrics such as the P/E ratio can take the backseat. The company has made some great innovative moves and its solid quarterly results this year have provided it with greater impetus.
One of Cree, Inc. (NASDAQ:CREE)’s breakthrough innovations is its 40-watt replacement LED light bulb which went on sale for just $9.97, undercutting larger and more powerful rivals such as General Electric Company (NYSE:GE). Cree, Inc. (NASDAQ:CREE) is looking to take this bulb to the masses and is aggressively focused on increasing awareness regarding it as it targets the 5 billion traditional bulbs used by domestic consumers in the U.S.
