Stocks of the Week!

In this email:

• The Chip Champ You Can't Ignore 🏆

• Dividends Are the Secret Sauce 💰👀

• All the AI I Can Get! 🤖❤️

The Chip Champ You Can't Ignore! 🏆

ASML has been flying high in 2024. Year to date they’re up over 45%.

But if you’ve missed the first boat you might not be left to drown just yet. 💦 

Even with the rapid growth I still think there’s plenty of meat left on this bone. Let me tell you why I’m still bullish. 🐂 

They’ve just dropped some impressive numbers for Q1 and (maybe more importantly) bumped their guidance for 2025.

The bump in guidance means they don’t think the growth is done yet. If anything, they think it’s just getting started.

So why are they confident enough to start making bigger promises for the future? There’s a few reasons.

1. Generative AI Demand: The AI boom isn’t slowing down anytime soon & ASML is right at the heart of it. More AI = more semiconductors. Guess who’s making those? Yup, ASML! 🧠💡

2. Capacity Expansion: If they’re the ones making the semiconductors, surely they’d make even more money if they could make them faster & more efficiently? That’s exactly what ASML have in mind. The plan is to expand production capacity by 2025/26 & fulfil massive multi-year backlogs. That’s a money tree just sitting there & now they’re sharpening the axe to cut it down.

(Do you cut down money trees? I guess you’d just pick the leaves. You get what I’m saying anyway. 🌱💰)

3. Foundries’ Capex: The top three foundries (semiconductor manufacturing companies) aren’t holding back on their capital expenditures. They’re all in, investing heavily in ASML’s high NA EUV machines for the most advanced AI applications and consumer electronics. 🎛️📲

ASML is also well positioned to take full advantage of future trends. You ever heard the phrase “Buy the rumour, sell the news?”. In essence, it means stay ahead of the curve. With a position in ASML now, I think we’re still early enough to be buying the rumour.

Lets look at some of the sectors they’re involved in, for example.

Automotive & renewable energy (just like AI) is still relatively new to the game. These sectors are guzzling up semiconductors like never before. Think of electric vehicles and solar tech – they all need chips, and ASML is the go-to supplier. 🚗⚡

And being a leader in the space before it was cool has it’s advantages too. It gives you a moat. Something that makes it difficult for new companies to compete with you on. ASML’s tech is so advanced, they’ve practically got a monopoly on the most cutting-edge chip-making machines. Competitors are years away from catching up.

I think a reasonable expectation could see us move beyond 1300 which would give you over a 21% upside.

If you want to be conservative, it might be worth sitting out & seeing if a pullback comes through. There has been some selling off lately. I personally will be holding a stock like this for a while so happy to jump in & play time in the market over timing the market!

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Dividends Are the Secret Sauce 💰👀

Verizon is a dividend investors wet dream right now. Their dividend yield is sitting at 6.6%.

You’d get a pretty nice chunk of change at the end of the year just for holding this. But that’s no good if the stock itself is overvalued.

So is it? What’s Happening at Verizon?

They’ve had a recent focus on convergence and GenAI. These moves are aimed at driving growth in its consumer business. Convergence means integrating their Fixed Wireless Access (FWA) and fiber services, which only 15% of Verizon's customers currently use.

That leaves them with a lot of room for growth!

And just like every other company in the world right now, they’re eyeing up big gains from GenAI. Think about AI at the edge of the network, enhancing everything from customer experience to network efficiency. It’s still early days, but this could be a big win for VZ. 🧠

But it hasn’t been all sunshine and rainbows. Verizon has been losing some ground in its consumer segment, with a net loss of 68,000 postpaid phone connections in Q1. This was actually better than what Wall Street expected but that doesn’t make it ok. The competition from T-Mobile and AT&T is tough & Verizon’s business revenue is also taking a hit. 📉

Even with the challenges, VZ’s price action has been stubborn (in a good way). The stock has been consolidating well above $40 since early 2024, with buyers keen to keep it there. It’s not skyrocketing, but steady consolidation can be a good sign of stability.

When you look at VZ’s forward P/E ratio of 8.8x compared to the sector median of 12.5x, it might seem undervalued. If you adjust for growth, T-Mobile’s lower PEG ratio makes it a more attractive option for growth investors. It really depends on what’s important to you for valuations. For income-focused investors, that juicy 6.6% dividend yield is hard to beat! 🍒

I’ve got them as a small part of the portfolio. I tend to feel that they’re undervalued. Price action looks good & that dividend yield makes it worth a go.

All the AI I Can Get! 🤖❤️

More AI?! Yes.

You’re probably going to get sick of hearing about it. But I really think if you can build a solid portfolio of fairly valued companies in the AI space over the next few years that lambo will come sooner rather than later.

So who are we looking at now?

Qualcomm!

Their new ARM-based Snapdragon X Elite CPU chips are causing a scene right now. Microsoft (MSFT) is all in, calling these bad boys the "fastest, most AI-ready PC ever built." 

These chips are not just about speed; they’re setting the stage for a big showdown with Apple’s M3-powered MacBook. 🔥

Add to that they’re exclusive deal with Microsoft for the Recall feature & they’re another company well positioned with desirable tech.

The caveat is, the competitors aren’t exactly sleeping on this one. Intel and AMD aren’t sitting this one out. But they just aren’t as good.

Intel & AMD are launching their own AI chips soon, but QCOM’s Snapdragon X Elite is already in the game with 45 TOPS (Tera Operations Per Second) of processing power. Put simply, it’s right in the mix between Intel's 40+ TOPS and AMD's 50 TOPS. Competition is heating up! 🔥

And even if it all goes horribly wrong Qualcomm are pretty well diversified in the space.

It’s not just the AI chips. From handsets to automotive, broadband, and even AR/VR/XR tech, they’re spreading their wings. And now, they’ve added ARM-based AI CPUs to the mix.

Just like a lot of other stocks in the space, they’ve had a rocket of a year in 2024. They’re up over 50% YTD.

But guess what?

QCOM’s valuation is still attractive compared to its peers. They’re rocking a forward P/E of 22.42x, which is more than reasonable when you look at the bigger picture. 📊

Again, the market as a whole looks like it might be running out of steam in the short term. If you want to sit on the side lines & wait for a pullback to a support of around $204 I wouldn’t blame you.

But again, I’m in this stock for the long haul. I’ll be averaging in until I have a reason to sell or cut my positions!

That’s all! See you same time next week 👋 

P.S Hit reply & let me know what you thought of this weeks newsletter. All feedback is welcomed ❤️