Bought AEM:SGX

AEM is a semicon supplier making test platforms for Intel, which should benefit from Intel's new Foundry business.  They made a loss in 2023 due to the biggest-ever covid-"stay-at-home"-semicon-bubble deflating, and the stock is down 35%.  I got this idea from the Value Investing Substack (part1) (part2) (paid links).

Its both a growth stock and a cyclical:

I think the 2H23 results were a cyclical drop, they should recover with the semiconductor cycle. And they have a structural tailwind behind them with the US trying to construct semiconductor fabs outside Taiwan and Intel re-establishing its manufacturing capability.

The key question for this company is: how much of its revenue is cyclical/non-cyclical, and recurring/non-recurring?  I am not sure yet, but it would affect wether its a trade or a buy-and-hold:

Source: 2023 Results Presentation (slide 11)

Its trading at around 10X peak earnings, not as cheap as I'd like but OK for a fast grower.  I bought a 5% position.

Risks:

• I don't have good knowledge of the semicon industry, hard for me to keep track of this niche (Suppliers of systems level testing equipment to Intel).

• In January an inventory shortfall was discovered, company said it was due to a manual mistake.  I believe theres no high-level fraud.

• The chart looks like shit and I may lose some fingers catching a falling knife.

• Or dead-SGX-stocks remain moribund, while Q's and crypto rocket in a new liquidity bubble.

I'm in a negative cash position now, so won't be buying anything else.  Will take a few months to pay off from my dividends/salary:

This blog will probably be quiet for a while.