Maybe we spend too much time talking about covid-19 or the election or even the need for stimulus even as there is no doubt that all three matter on days like today.
Maybe we should leave some room for leadership, the kind that transcends all of the macro obstacles and drives a level of performance that must be put in your calculus when you pick a stock. The kind that Lisa Su the CEO of Advanced Micro Devices (AMD) gives you in spades.
If you don't know Lisa Su by now I am tempted to say to you don't embarrass yourself, she may be the foremost executive of our time. Su, who arrived in this country from Taiwan when she was three, whizzed through the Bronx High School of Science and then went to MIT earning her bachelors, master and doctorate in electrical engineering, a skillset she adopted because she thought it to be the hardest major. Hence the appellation Dr. Lisa Su. In other words, she's a total east coast heavyweight. After working at IBM (IBM) and several semiconductor companies, she arrived at AMD in 2012. She became CEO and president in 2014 of AMD when its stock traded at $2. It was an inauspicious time, as the stock would indicate, with an also-ran portfolio of semis and one of the worst balance sheets of any public company. Many thought the company was destined for bankruptcy.
Not Su, who is among the most competitive people I have ever met. Even as her background was engineering, the first thing she knew, the first thing she had to do was not help design new chips to get back into the game, but fix the balance sheet so she had the money to hire the engineers to compete in the big with arch-rival Intel (INTC) .
When she raised the money she needed she reached out to me to set the record straight. She told me that my worshipping of Intel had to end because she was going to make me eat crow. I told her that I had been an Intel-aholic and was so enamored of the company that I often thought they kept AMD alive so the antitrust division of the Justice Department wouldn't pursue Intel as a monopolist.
She didn't think it was funny.
It took me some time as the stock bounced around under $10 that she was the real deal. Her roadmap to be a leader in personal computer and gaming chips was actually realistic. In the last few years she moved into the data center again becoming a force in that rapidly growing arena.
I am glad I got aboard not just because I have helped force people to study the turn she engineered, but to go along with it as she passed Intel and became the dominant personal computer and then data center chip maker.
Today Su reported a quarter that was a scorcher, far far better than expected to the point that this $77 stock could have easily wound up at $100. That's what should happen when you grow your revenues 56%. Just a week ago we listened to Intel talk about the tough environment. But it seems like it is only tough for Intel because this quarter was magnificent.
More important she announced the acquisition of Xilinx (XLNX) , a multi-faceted semiconductor for $35 billion in stock, a remarkable feat given where AMD was a half dozen years ago. When I asked her about the deal this morning, and how I found it expensive, she explained that it is accretive from day one, meaning that it will be additive to earnings instantly and it also brought her balance sheet up to where it has $5 billion in its coffers.
Why buy a company that has some data center exposure but is known far more for its internet of things approach where it has automotive - the trickiest digital kind - as well as telecommunications and defense? The TAM she said, which is the total addressable market... she wants to shoot high and be in many, many markets rather than be pigeonholed into gaming, PCs and data centers. Given the way the world is going I couldn't agree more.
Now her stock went down on the news, not because the quarter wasn't good enough but because some arbitrageurs put pressure on it by buying Xilinx and selling AMD to take advantage of the gap. Others sold AMD because they didn't want to wait a year and a half for the deal to close, as the company seeks approval from entities like our Justice Department as well as the Chinese authorities. Still others, I think, doubted Su.
I know better than to do that.
I think the stock's a buy.
I by no means want to suggest that there's only one CEO who is making a difference despite Covid and a divided nation. In fact, they are far more common than you might believe.
Harley-Davidson (HOG) , for example, has been a woeful company beaten by overseas competitors taking share, with an expense structure that's out of whack and a culture that seemed as aged as the older men who seemed to dominate their customer base.
In comes Jochen Zeitz, from Mannheim, Germany, yea, Germany and he's turned the place upside down in a very short time bringing in younger people, a woman CFO, and a change in the nature of the business. Gone is the expensive array of motorcycles that appeal to just a handful of people. The company has brought in a chief digital officer to help reinvent or rewire the company as Zeitz calls it.
We weren't sure at first. After all, the company seemed broken and withered. We learned today that Zeitz's unorthodox methods are working. The company generated the first upside surprise that I can remember sending the stock soaring, and given the lean inventories and the lack of one-off expensive offerings, I wouldn't be surprised if it is the first of many.
Or there's Kevin Conroy, someone we have championed for ages as a man who has built Exact Sciences (EXAS) into the premier testing organization for colorectal cancer. You know what he did today? He bought what many think is the premier liquid biopsy company, Thrive, for $2.15 billion. We are talking about multi-cancer blood-based screening, which many in medicine think is the holy grail in the era of targeted medicine. It will compete with Grail, another blood-based screener purchased for $8 billion by Illumina (ILMN) , a genetic evaluation company. But I think that the much lower price tag was a principal reason that EXAS soared $28, a remarkable reaction to the purchase of a private company for 65% stock and 35% cash.
Now Conroy built Exact Sciences into the diagnostic powerhouse that its become and Zeitz has turned around a company with the best brand name in the business, the aptly ticker-symbolled HOG, both high achievements.
But when we want to celebrate success we must celebrate the impossible, the cleaning of the Augean stables by Dr. Lisa Su and then a pivot to turning AMD into a Prometheus unbound. Yep, I have to go mythical to explain the story of this turnaround, a turnaround that is now in phase two of its development. Now there's much more ahead and you get to buy a company that would have blown the doors off by reporting a quarter, but the goal is to build a lasting big semiconductor company, one with scale that has aspirations far bigger than the PC, the game and the data center. I say bank with her and go along for the ride.