Weekly Update: 3.19.18

We Are Now in the Micron Market and D-Day is AFTER Market Thursday


Dear Subscriber,

Going to make this short but there is a LOT to get to this week.

#1 Based on my emails and texts and Messenger texts from our fabulous and now very rich subscribers (had to throw that in)... here is sentiment as shared by longtime subscriber PB:
"Tobysan...seems like we are once again at a moment of truth. In February 2014 we were up a lot from 2013...after a dip. Same in February 2015...in February 2016 we corrected and bought NVDA AMD MU AMAT LRCX OLED and other and made a fortune...after 2016 I fired my financial advisor!
In Feb/March 2017 we continued to make a fortune...and in Jan the market melted up and we sold some stocks and bought some puts and held on for another correction. 

Now it is 2018...the $100k I put into your favored  3D NAND space and GPUs (PS I never sold my NVDA...hee hee) is near $500,000 since I started with you. I do NOT want to give more than 10% ish back...what do I do now? ( And I forgive you for giving back profits in OLED adn AAOI because you top ticked AMBA and Imping and saved me a boat load!). 

PB--well we sold OLED as it broke our $120 sell stop today as you know ...so you have that cash.

Micron reports Thursday after the bell. Assuming you have your shares in 1000 share lots (which I know is how you buy your stocks you dog) here is what we are going to do: First, did you notice the memory and GPU stocks did relatively NOTHING today in a 2% down tech tape? MU AMD LRCX AMAT AMLS LRCX NVDA 1% ish down...no whoop. BPO Tech Stack players like SHOP and our BDCL/MReits MORL/BDCL NEWT moved down only 1% aggregate or 50% LESS than the high p/e problems du jour Facebook. PS-We will have a lot more on that FB  in NL...but when you are social media app based on trust and you SCREW 50 million of your 200 million users...and now have the Feds on your tail in reminds me a LOT of Microsoft in March 2000 when they missed earnings and then in May got hit with monopoly charges...just saying.

The Advanced Memory/ Advanced 3D/5G Functionality Stocks and The Advanced Manufacturing Productivity tech we are stalking like Intel (INTC) TSM STX DLGNG (Dialog Semi) LITE, MRVL RTEC CRNT MAXR ENTG  CASA were net UP for the day (YES...put ALL these stocks in your watch list!).

In our Advanced Business Process Automation stack we are stalking had net positives in SHOP BZUN CASA HUBS SPLK VEEV MOMO CRM PEGA CLDR PTC ADBE TCEHY TWLO ZBRA (yes PUT those tickers into your watch list too!). Add cost-saving Fintech plays as well: Square (SQ) and Paypal (PYPL)  and Stripe private but coming public soon. 

Notice a pattern? YES...the broad term "ADVANCED". You could put everything under the umbrella of this theme; The Productivity Trade. Why? Because IF an enterprise-grade company (to me over 100 employees) has extra money from tax savings AND gets 100% depreciation on ALL equipment and software purchases/cloud subscriptions...the ROI on those capital investments AT THE NEW corp tax rate .5-2X higher based on $CASH/Benefits labor productivity savings.  In the real fintech space ANYONE who is going after the legacy $60 billion in legacy "swipe profits" aka what the banks and credit card infrastructure companies are hording we will own as well.

SO...Micron.  #1 SELL some to where you are comfortable...I'm not your Daddy. #2 Here is hedge play fpr whatever amount YOU want to protect:
MU We sell a call at $62 and get around $2 in premium--IF the stock runs crazy up after earnings you will sell your shares to someone for $62--with your LOW $12 cost basis who cares?
NEXT you buy a $58 put which expires on Friday the 23rd for insurance. Right now it's around $2. IF MU craters Friday you make a YOOGE profit on the Put Option and you lowered your cost basis by $2...all of which makes your total profit 20% HIGHER based on your next cost basis ok?

For the entire Advanced Memory makers and equipment suppliers...let buy a PUT option on the Semiconductor Index SMH at $109.50 same expire...the 23.  The Underlying index SMH is $110 in after hours...the put option is to put 100 shares or about $10k of SMH at $109.50.

NOW...you HAVE TP CLOSE THESE options by the end of the day....comprende?

Alternatively, you can do the same out farther April or May--your call. For the portfolio I will buy protection by buying the $109.50 puts and selling the $109 calls for roughly the same premium...it's called a "collar" in options land which means I am locking in our ALL our Advanced Memory Portfolio: AMAT MU LRCX AMLS ACLS AMD NVDA. Only NVDA sells at an above market Price/Earnings ratio...so our risk here is small.

BUT AGAIN...I want you all to get used to what a NORMAL volatility market looks like. We Peaked on March 13 and for Semi's the 100-day is major support (again the February correction was a FLASH CRASH caused by the $350 billion SHORT volatility that forced HUGE forced selling of stocks because of margin calls i.e, a market NOT economic phenomenon. )

It has beaten earnings are earned $10 BILLION more in earnings in the last 18 months that from the entire 2008 to 2016

Quarterly Earnings Surprise History

Quarter EndDate
Per ShareConsensus
EPS* Forecast%





d104cd6d-2916-40d4-85d6-ff4861962471 (1).png

a back and fill to $102 or below for a few days would be a normal healthy pullback. We would RING the bell on our options and have a big steak on the weekend. 

But as Ross Perot would say "Here's the Deal!")  Micron the stock is WAY WAY overbought here. ANY disappointing news, guidance, a fart by the CEO on the conference call will send the stock tumbling. IF you are NOT familiar with what a major WAY overbought stock melt-up looks like...here is the prime example. Print this one out and paste it to your PC by 4pm Thursday. 

Micron IS the poster child leader of this stock market--EVERYONE including my dead father-in-law owns' it. UNLESS IT SMASHES AGAIN and Raises guidance it is set up for a VERY NEEDED fall back to $52-$53 at least.


FYI...here is the $100 NEW TARGET for Micron from RW Baird who I do follow in the chip research space:

Baird maintains an Outperform rating and raises its Micron (NASDAQ:MU) price target from $60 to $100, a 70% upside to yesterday’s close.

Analyst Tristan Gerra cites stronger-than-expected memory trends with DRAM contract pricing experiencing a “significant increase” in 1H18. NAND flash price reductions expected more muted in the first half than previously expected. 

Gerra expects NAND contract pricing to decline 3% to 4% Q/Q in Q1 of CY18, by higher single-digits in Q2, and by 15% to 20% in CY18.
BUT Micron's 3D NAND chips are REPLACING general NAND chips and contracts.

Our target for MU WAS $60--we got here. We are up 132% year over year and 420% from our initial entry price in November of 2015 and 520% since our second buy at $8.60 in Febuary 2016 correction. I  can't get to $100 YET but based on Thursday night's call I very well could--that would only  take MU from an 8. P/E to about a 13-14--the overall market is 18.2. Micron has been a literal $millionaire make for a few of our suscribers...we are NOT SELLING IT. If you dont care to hedge --BE MY GUEST. 


IN addition...according to ShortSqueeze.com there are only 1.4 days of shares short based on average volume...no whoop. 

SO Friends...let's 1) Get through Feds Wednesday Meeting  and .25 basis point raise--I think Powell this time will NOT SCREW THE POOCH with namby pampy talk. "Our data dots (median raise forecast) is COMPLETELY data-driven" is what the market wants to hear. 

Then the Micron Market Thrusday night-which is only up 40% for us this year (from $44 entry)--as Micron goes so goes the Advanced Memory Microchip complex (which lets face it is THE leadership in the market along with GPUs and BPA Cloud software).

See ya Friday...it's either prime BIG ASS steaks for the weekend or bratwurst--In my book that is a no lose deal!

MU We sold calls at $62 and get around $2 in premium--Cover the CALLS at $1. IF we get a big surprise UP you don't miss it
HOLD the $58 put which expires on Friday the 23rd for insurance--it's at $2 now

For the entire Advanced Memory makers and equipment suppliers...let buy a PUT option on the Semiconductor Index SMH at $109.50 same expire...the 23.  The Underlying index SMH is $110 in after hours...the put option is to put 100 shares or about $10k of SMH at $109.50.

NOW...you HAVE TP CLOSE THESE options by the end of the day....comprende?

SMH Options: HOLD the $109.50 puts we are up 45% on and close $109 calls you sold for 70% GAIN

Trumps INSANITY for $50 billion in tariffs against China WILL NEGATIVELY AFFECT Micron and MAY hurt AMAT and LRCX in that their competitors are located in Japan and Europe.

Advanced Memory Portfolio: AMAT MU LRCX AMLS ACLS AMD NVDA. Only NVDA sells at an above market Price/Earnings ratio...so our risk here is small.

HERE is the China 2025 plan they introduced in late 2016...their goals are UNAMBIGUOUS...and to get close they need ALL the semi and OLED equipment they can buy. AMLS and ACLS are non-US domiciled...but literally you cannot build a foundry without Lam Reseach and Applied Materials...so I  

For all you Trump fans...you are getting what you voted for: A 71 year old technology illiterate who lets HOPE is faking this  UNILATERAL trade insanity against China. His MO is big words on announcement (steel and aoluminum tariffes writ large) and then a walk back.
When the TECH CEOs get done wailing and screaming...my guess is we get the same.

IF WE DONT" then we will take a TON OF PROFITS in the Advanced Memory space and look to re-enter of the inevitable sell off.

Micron calls WAY outnumber PUTS to the market thinks an even bigger beat than usual --THAT is priced in. It guidance from the call at 1:30 PST that will make the difference for manana.

We are now covered on the downside and free on the upside.

Cheers! Toby


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