I have sold off this stock as of End June 2021. The reason is only due to a need to rebalance my portfolio to make room for more value stocks. The below analysis are still relevant as of June 2021.
In the Portfolio Spotlight Series – i will be going through each holding in my portfolio and the selection criteria for its entry. Stocks are either
1. Great companies with consistent earnings, free cash flow, strong competitive moats. These are first team players
2. Potential growth companies with breakout earnings, growing competitive moats etc… these are hot youth prospects
3. Geographical / sector diversifications.. these are meant for diversification purpose and are reserves
The third in the Portfolio Spotlight series is AMD. AMD stands for Advance Micro Devices Inc. I just initiated a position in this company and I have medium conviction in this stock short term. AMD currently holds the position of fullback in my team.
1)Consistent Revenue Growth
2)Consistent Free Cash Flow
3)Market Cap and Revenue Multiple Growth
AMD displays strong growth in its market cap and revenue multiple consistently for the past 5 years and more.
4) Consistent Net Income Multiple
5) Future growth
This last factor is fundamental analysis. Does AMD have future market growth driver(s) ? The answer is depends.
Currently AMD and Intel are competing fiercely for Desktop CPU space, is a distant second behind Nvidia (which has 80% market share! ) for GPUs and maintains many strategic partnership alliances to offer a plethora of products such as
Central processing units
Graphics processing unit
Network interface controllers
In terms of market growth driver(s), as long as AMD can continue to earn profits and sustain its competitiveness by leveraging on its strategic partnerships, no one can discount its ability in the future to design better CPU, GPU chipsets and gain further market share from its main competitors (Intel , Nvidia)
However in the mid-long term horizon, i see increasing competition for AMD. AMD gained market share in the desktop CPU space as a result of leveraging on TSM while Intel’s management stumbled in their 7 nm chip technology pursue.
One growth driver is the impending merger and acquisition of Xilinx, the world’s top FPGA manufacturer (Field Programmable Gate Array). FPGA is a type of chip which allows customization of logic blocks and interconnects. This is to further strengthen AMD’s fight against Intel which acquired Xilinx’s competitor – Altera in 2015.
In conclusion, AMD is probably a short-term play and i have to monitor its market dominance with Intel and Nvidia within the next 2 years. I may also exit in favor of a better stock available at attractive price levels.