Micron: Leader in Growing Industry With Supply-Side Discipline

Nitin Sacheti of ARS Investment Partners presented his investment thesis on Micron Technology (US: MU) at Wide-Moat Investing Summit 2021.

Thesis summary:

Micron appears poised to benefit from a secular shift beginning with AI, machine-learning, 5G, and IOT. The “digitization of everything” should result in significant DRAM demand growth as more devices and more “content per box” drives usage.

Micron and its competitors benefit from new industry discipline around supply. As capex needs have increased with greater DRAM complexity, many fringe players have either gone bankrupt or been bought by the three remaining players, resulting in the benefits of an oligopoly market structure.

Micron exhibits quality capital allocation. Management recognizes the secular/structural shifts in the industry that are resulting in more predictable and growing free cash flows and the low multiple at which their stock trades, resulting in significant stock buybacks.

Meanwhile, Micron stock still trades like a cyclical, with a market quotation equal to an estimated 10x FY22 free cash flow. The DRAM industry has historically been a poor business marred by significant race to the bottom but that is changing post industry consolidation.

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About the instructor:

Nitin Sacheti is a Portfolio Manager at ARS Investment Partners. He is also the author of Downside Protection: Process and Tenets for Short Selling in All Market Environments and has appeared numerous times in Forbes and on the TD Ameritrade Network.

Prior to joining ARS, Nitin founded Papyrus Capital and beforehand, was a Senior Analyst/Principal with Equity Contribution at Charter Bridge Capital where he managed the firm’s investments in the technology, media and telecom sectors as well as select consumer investments.

Previously, Nitin was a Senior Analyst at Cobalt Capital, managing the firm’s technology, media and telecom investments and Tiger Europe Management. He began his investment career in 2006 at Ampere Capital Management, a consumer, media, telecom and technology focused investment firm, initially as a Junior Analyst, later becoming Assistant Portfolio Manager.

Nitin graduated from the University of Chicago with a BA in Economics, was a visiting undergraduate student in Economics at Harvard University and attended the Loomis Chaffee School in Windsor, CT.

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