Venture: Japan Internet
Issue 124;
By 2020, semiconductor stocks had regained the level reached in 2000. The surge since 2020 has been running at 26% p.a. It is seemingly the only game in town, driven by booming chip prices, in the scramble to generate compute.
Chips
I have chip envy and wish I had taken this sector more seriously, but being valuation-sensitive, it is hard to get your head around these numbers. Lam Research was well known during the dot-com boom, peaking at 5x sales. This time, it’s at 17.2x and still rising.
Lam Research Price-to-Sales
Between 2002 and 2020, it had an average free cash flow yield of 7%. Today? 1.6%. It takes some confidence to chase these stocks at these levels. I am grateful that ByteTree Venture is not entirely technophobic, as we hold space stocks. But having done so well, it will be time to sell when SpaceX floats.
When the market leadership is so thin, I don’t think it is right to panic. We’ll always need chips, but chip stocks will not always trade at these excessive multiples. This week, Venture investigated an early trend in an out-of-favour tech company with a 21% free cash flow yield and on 1.5x sales.
The Shift to the Venture Portfolio
Thank you for your feedback on ByteTree Venture’s shift from a tip sheet to a portfolio, which was well-received. It got to the point where the list of past ideas no longer seemed relevant, and a track record will have more visibility.
Venture Portfolio vs the World Index
Venture Asset Allocation
Today, we make a new addition to the newly adopted Venture portfolio.
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Investment Director: Charlie Morris. Editors or contributors may have an interest in recommendations. Information and opinions expressed do not necessarily reflect the views of other editors/contributors of ByteTree Group Ltd. ByteTree Asset Management (FRN 933150) is an Appointed Representative of Strata Global Ltd (FRN 563834), which is regulated by the Financial Conduct Authority.
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