Portfolio Spotlight [Dimmed] – AMD

Update

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.

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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

Asset CategorySymbolQuantity
StocksAMD300
StocksCXSE200
StocksMSFT500
StocksPLTR4000
StocksTSM200

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

AMD , like Microsoft, also display consistent revenue growth for 5 years and more.

2)Consistent Free Cash Flow

AMD just turn positive free cash flow in the last 3 years

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

AMD also has had consistent net income multiple. However, there was a recent dip in 2019 Q3. This indicates a management team which may have issues in managing its bottom line in recent times.

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
Microprocessors
Systems-on-chip (SoCs)
Motherboard chipsets
Network interface controllers
Embedded processors
Solid-state drives
Drivers
TV accessories

https://en.wikipedia.org/wiki/AMD

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.

https://www.reuters.com/article/us-amd-results-idUSKCN24T2V6

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.

https://www.forbes.com/sites/willyshih/2020/10/27/why-amd-is-paying-35-billion-to-buy-xilinx/?sh=5a0539cb4432

https://www.forbes.com/sites/davealtavilla/2020/10/28/amds-35-billion-acquisition-of-xilinx-is-another-stroke-of-strategic-brilliance/?sh=5511f5f91c9f

https://newsroom.intel.com/news-releases/intel-completes-acquisition-of-altera/#gs.2sgpfi

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.

Portfolio Spotlight Series 1 – TSM

Update

I have bought into this stock again as of July 2021 at a good price support level after its earnings call. I will be updating this in my next portfolio update.

———————————————————————————————————————————–

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

Asset CategorySymbolQuantity
StocksAMD300
StocksCXSE200
StocksMSFT500
StocksPLTR4000
StocksTSM200

The second in the Portfolio Spotlight series is TSM. TSM stands for Taiwan Semiconductor Manufacturing Company. I just initiated a position in this company and I have strong conviction in this stock short to mid term. TSM currently holds the position of Fullback in my team.

1)Consistent Revenue Growth

TSM , like Microsoft, also display consistent revenue growth for 5 years and more.

2)Consistent Free Cash Flow

TSM also has consistent free cash flow for the past 4-5 years

3)Market Cap and Revenue Multiple Growth

TSM displays strong growth in its market cap and revenue multiple consistently for the past 5 years and more. Again, this shows strong competitive moats !

4) Consistent Net Income Multiple

TSM also has had consistent net income multiple. This indicates a management team which is efficient in handling its bottom line as well.

5) Future growth

This last factor is fundamental analysis. Does TSM have future market growth driver(s) ? The answer is depends.

Currently TSM is the world’s top semiconductor foundry and is only one of 2 foundries (the other being Samsung) able to manufacture 5 and 7 nm chips using advanced EUV technology. EUV machines are very expensive (think upwards from US 120 Million per machine). As such, only dedicated foundries like TSM find it worthwhile to make such heavy investments. This creates very high barriers of entry for competitors.

https://en.wikipedia.org/wiki/Extreme_ultraviolet_lithography

Majority of tech companies requiring chips are customers of TSM (e.g. Apple , AMD, ARM, Nvidia), cementing its position as the world’s top foundry.

https://en.wikipedia.org/wiki/TSMC

In terms of market growth driver(s), as long as TSM can continue to earn profits and sustain its competitiveness by investing in advance cutting edge technology to make 5 nm chips. No one can discount its ability in the future to produce even thinner chips below 5 nm due to Moore’s Law.

However in the long term horizon, i see increasing competition for TSM from foreign foundries like Samsung, SMIC and Intel . TSM is a Taiwanese company and currently it is no secret that China considers Taiwan part of its territory.

https://en.wikipedia.org/wiki/Cross-Strait_relations

Hence TSM may get caught up in the growing US China Conflict. Long term profitability may be affected by political factors. Also, with China calibrating towards self-reliance in core technology such as semiconductors, SMIC – China’s largest foundry will expect to receive significant investments from its government in a bid to catch up with TSM. Hence long term wise, it depends on how the china us relations play out as well as how TSM management navigate the waters.

https://thediplomat.com/2020/12/would-china-invade-taiwan-for-tsmc/

Portfolio Spotlight Series 1 – Microsoft

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

Asset CategorySymbolQuantity
StocksAMD300
StocksCXSE200
StocksMSFT500
StocksPLTR4000
StocksTSM200

The first in the Portfolio Spotlight series is Microsoft. It is the biggest holding by value in my portfolio and I have strong conviction in this stock mid to long-term. Microsoft currently holds the position of Goalkeeper in my team.

1)Consistent Revenue Growth

Microsoft has consistent revenue growth since FY14 ( 5 years and more) . Not only that, it also has consistent operating income as well.

2)Consistent Free Cash Flow

Microsoft has had consistent free cash flow (5 Years and more). Amazing

3)Market Cap and Revenue Multiple Growth

Microsoft has been growing its market cap and revenue multiple (5 years and more). this is extremely rare for companies and shows that it has a very strong competitive moat which prevents undercutting due to price wars.

4) Consistent Net Income Multiple

Microsoft has had consistent net income multiple. This indicates a management team which is efficient in handling its bottom line. A great management team is very important!

5) Future growth

This last factor is fundamental analysis. Does Microsoft have future market growth driver(s) ? The answer is yes !

Most of Microsoft’s future growth drivers will leverage on its Azure Cloud Platform.

Already, Microsoft is making inroads into Defense sector which is traditionally a value sector (think Lockheed Martin, Boeing etc).

It won a 21.9 Billion USD contract over 10 years with the US Army to deliver more than 120,000 HoloLens AR headsets

https://www.cnbc.com/2021/03/31/microsoft-wins-contract-to-make-modified-hololens-for-us-army.html

With this contract win, Microsoft prove it has the ability to craft new product lineups and with first mover advantage.

Microsoft also won the famous JEDI Cloud contract awarded by the US Defense Department back in Oct 2019, beating the likes of Oracle and Amazon. However Amazon refuse to admit defeat and has launch countless lawsuits to dispute the win, mostly base on the argument that the win was unfairly influenced by Donald Trump as a result of his private disputes with Amazon Chairman Jeff Bezos over The Washington Post.

https://www.cnbc.com/2019/10/25/microsoft-wins-major-defense-cloud-contract-beating-out-amazon.html

Microsoft’s current product lineup are
Productivity and Business Processes
1.Office Commercial
2.Office Consumer
3.Linkedin
4.Dynamics

Intelligent Cloud
1.Azure Cloud Services

Personal Computing
1.Windows OEM, Commercial & Cloud
2.Devices (Microsoft Surface)
3.Gaming(Xbox)
4.Search Advertising

Portfolio update – May 2021

Asset CategorySymbolQuantityCost BasisClose PriceValue
StocksAMD3002195780.8124243
StocksCXSE2001236967.7913558
StocksMSFT500120473.25247.4123700
StocksPLTR40007325123.0692240
StocksTSM20023441.88118.5123702
Equity and Index OptionsIEF 20JAN23 108.0 P1270.71282.3286232.86
Equity and Index OptionsKL 18JUN21 40.0 P132.90780.276827.68
Equity and Index OptionsMSFT 18JUN21 237.5 P-3-368.1287181.25-375
Equity and Index OptionsPLTR 20JAN23 65.0 C508565.641.7558775
Equity and Index OptionsTLT 20JAN23 110.0 P1419.08284.225422.5
Equity and Index OptionsMSFT  210618C0026000050.66-330-5
I started a collaborative fund back in July 2020. The short term aim was to see how far it could go within 1 year. Till date, the fund has reach a performance of 50 % – beating the S&P 500 on average. With this benchmark in mind, the long term aim is now to reach 2 million within 6 years with financial freedom in mind. This blog was created to capture this journey. The initial dips in Q3 2020 and Q4 2020 were as a result of overallocation in certain bubble stocks which i have since sold off. The focus is on an investing strategy of

– good companies with strong competitive moats, consistent earnings
– growth companies with breakout earnings, growing competitive moats
– geographical diversification