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Michael Burry of The Big Short fame doesn’t buy the narrative that memory-chip makers have entered a supercycle. He has a point.
In a Substack post, the value-oriented investor disclosed he had shorted shares of Micron Technology Inc., saying that it “defines cyclical like no other.” He went on to write that “when times are good, the stock gets pumped more than it should. When times are bad it gets dumped more than it should.”
Indeed, judging by share prices alone, the world’s top three memory-chip makers — Samsung Electronics Co., SK Hynix Inc. and Micron — are enforcing the perception of an industry prone to volatile boom-and-bust cycles. When profits skyrocket and the outlook is rosy, these stocks, based on forward earnings, could look deceptively cheap, prompting some to chase rallies in moves that resemble momentum trading. But if sentiment turns sour, investors immediately question the reliability of analysts’ forecasts and start offloading shares. They resort to alternative valuation metrics, such as price-to-book, which are often applied on distressed firms.
This is exactly what we’ve witnessed.
Read the whole thing. Governments Must Fix Their Debt Messes Before It’s Too Late — Michael R. Bloomberg America’s Battlefield Dominance Is Under Serious Threat — Max Hastings Micron’s Massive Profits Are a Guarantee of Trouble — Chris Bryant Nigel Farage’s Desperate Gamble May Well Be the End — Rosa Prince Private Equity for Everyone Is Getting Out of Hand — Allison Schrager GameStop Has Enough Stock Now — Matt Levine Trump’s Iran Ceasefire Was Built to Fail — Marc Champion Where’s the Oil Price Headed? Only China Knows — Javier Blas Meta Is Ushering In the Era of the K-Shaped Company — Beth Kowitt
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