| Investing Legend Joel Greenblatt Takes the Plunge on Micron Technology, Inc. (MU), Pulls Back on Apple Inc. (AAPL) |
How does Greenblatt’s magic formula apply to MU and AAPL right now? - December 6, 2017, 11:37 AM EDT
Hedge fund legend Joel Greenblatt founded one of the world’s most famous funds, the $6.8 billion Gotham Asset Management fund, back in 1985. The fund is closely tracked by investors around the world looking for a clue into how this top fund manager perceives the market. In the last quarter, Greenblatt made two very interesting moves in key stocks, namely Micron Technology Inc (NASDAQ: MU) and Apple Inc (NASDAQ: AAPL).
Now let’s take a closer dive into these two big portfolio moves in MU and AAPL:
In the third quarter, Greenblatt took a leap of faith with chip stock Micron. He initiated a new position in the stock with the purchase of 1,477,788 MU shares valued at $58,121,000.
Cowen & Co analyst Karl Ackerman shares Greenblatt’s confident take on this stock. In a December 5 report, he notes that Micron will soon be reporting its results for the first fiscal quarter of 2018 on December 19. He believes that while the market is anticipating a strong first fiscal quarter beat, it is underestimating Micron’s potential for the second fiscal quarter. Indeed, he is anticipating upside of real ‘magnitude’ especially bearing in mind the stock’s robust average selling price (ASP) momentum. As a result, Ackerman reiterates his buy rating on the stock with a $50 price target (21% upside potential).
Note that Ackerman is less nervous than the rest of the Street about near-term weakness in NAND memory spot pricing as supply loosens. He points out that ~75% of industry NAND sales are done via contract- which will limit the potential volatility of prices. At the same time, he adds: “we take comfort in the trajectory of near term NAND pricing momentum as spot prices for mobile (eMMC) are 15% above CQ4 contract pricing, spot MLC is also 15% above contract and TLC spot/contract is in line.”
Crucially, his bullish take on the stock extends further than just the second fiscal quarter based on MU’s DRAM outlook. He says: “Longer term, we remain favorably disposed toward DRAM w/ our checks in Asia indicating just slightly lower capex plans from Samsung in C2018. While the NAND supply picture is somewhat opaque in 2H:18, we see no fundamental change for the next few qtrs.” Indeed, Ackerman says he is more confident in robust DRAM fundamentals compared to NAND for the next 12-24 months. He believes that Samsung’s focus on maximizing DRAM profits rather than increasing share will support a favorable DRAM supply/demand outlook for 2018.
As for Ackerman himself, TipRanks shows that he has a promising track record on the stock with a 67% success rate and 22.8% average return across his MU stock ratings. And if we take a step back, we can see that the Street in general has a very bullish take on Micron. Over the last three months this ‘Strong Buy’ stock has received 22 buy ratings and just 3 hold ratings. The average analyst price target of $53.48 translates into big upside potential of almost 30%.
more on Apple at the link