Believe the unbelievable in this market — things can be different this time
So many things have never happened before. That's what's so amazing about this market. Everywhere we turn, we see changes made that aren't believed and yet are totally true. Take, for example, the following unbelievable...
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Here is a story making headlines in the economy: So many things have never happened before. That's what's so amazing about this market. Everywhere we turn, we see changes made that aren't believed and yet are totally true.
Take, for example, the following unbelievable year-to-date performances: SanDisk up 496%, Seagate up 238%, Club name Micron up 208%, and Western Digital up 171%. All four of these storage and memory companies have been, for whole chunks of time, terrible and dangerous investments. There would be periods of spectacular growth followed by horrendous swoons that would wipe out all of the gains.
Economic Details
The swoons were often brought on by their own desires to capitalize on demand by putting up new plants. They don't do that anymore. They have long-term supply agreements that amount to what SanDisk calls the "New Business Model.
" They have all gotten disciplined, so no one pits one against the other. They have all gotten a little more specialized. SanDisk, Seagate, and Western Digital take a huge percentage of their profits and plow them back into buybacks.
SanDisk has a $6 billion buyback, while Seagate has a $5 billion buyback, and Western Digital has a $4 billion buyback. Only Micron doesn't buy back stock. MU SNDK,STX,WDC YTD mountain Year to date performances These are now enormous companies: SanDisk has a $244 billion market cap, while Seagate has a $220 billion market cap, and Western Digital has a $195 billion market cap.
Analyst Views
Micron has a $1 trillion stock market value. The Big 3 with the buybacks should not be able to move their stock with that much buying. But it is integral to people believing that their stocks are cheap.
The non-GAAP gross margin of Seagate's last quarter was 47%, a record; last year it was at 35%. Western Digital was 51%; it was at 40% just five quarters ago. SanDisk went from 22% to 78% in one year.
Micron was at 85%, up from 30%. This is not supposed to happen. But it is why Micron went from a $136 billion market cap to $1 trillion in a year; Seagate went from $30 billion to $220 billion; Western Digital went from $21 billion to $195 billion; and SanDisk went from $6 billion to $244 billion.
Economists are analysing what the news means for the markets.
