Micron's (MU) become the whipping boy. After the UBS downgrade this morning this stock now sells at slightly below 5 times 2018 earnings.
Micron foreshadowed this decline when it failed to rally after running into what was a very good quarter. Now remember Micron represents two businesses: flash and DRAM. We know flash has gotten weaker, not appreciably so, but weaker even as Western Digital (WDC) remains well above where it was when pricing was a little stronger.
But DRAMs? There is still no sign that they have peaked so this is a very gutsy call.
The really incredible call, though, isn't the Micron sell; it's the Texas Instruments (TXN) sell. This is a company has put up years and years of strong numbers with incredible profit growth. But, like Micron, this stock peaked at $119.89 when it reported back in January and then rolled over.
Now Texas Instruments is a well-diversified maker of all sorts of chips for industry and for the Internet of Things. It's truly been a remarkable performer since September of 2017 having shot up from $80 to the January peak. Unlike Micron, Texas Instrument's stock sells at 20 times earnings. To me the downgrade seems more of an "okay, not much new here." Still, the power of this downgrade is really rather shocking. It shows how easy it is to take a stock down. The fact that Lam rolled over so hard on these two sells is also a sign that you could really trash a group far more easily than people realize. It is an unforgiving market.
I point all of this out to remind you that you can crack anything tech right now. The strength in the group to me is fragile.
The other day we took some profits for my charitable trust and told club members you have to be careful. We left some points on the table, but I thought the risks were just too great to be as big as we were. I can look at the prices now and kick myself that things went higher.
Or I can look at what we have left and what happened to Micron and Texas Instrument I feel better and can sleep a lot easier.