The following is an excerpt from Narwhal’s Second Quarter 2016 Newsletter, which will be released later this week.
Our First Solar (ticker FSLR) investment is an example our value-first approach to stock analysis with an emphasis on a secular growth story. After a strong start to the year, the shares were hit on concerns about financing structures in the industry and the bankruptcy of Wall Street darling SunEdison (formerly SUNE, now SUNEQ). However, FSLR has adopted a different strategy in which the management team prides technology innovation over financial engineering. With a strong net cash position on the balance sheet and a reasonable valuation, we expect FSLR to be in pole position to capitalize on the secular potential of solar energy. We picked this stock up for some of our more risk-tolerant accounts.
Caught up in the negative sentiment surrounding the auto industry and mobile phones, NXP Semiconductors (ticker NXPI) – a supplier to both industries – has seen its share price go nowhere. However, we think that continued technology advancement in the automobile is likely (e.g. TSLA) and expect NXPI to grow its dollar-share content over the next 3-5 years. In addition, at a P/E of less than 15, we think NXPI’s shares are already discounting an extension in the mobile phone upgrade cycle. NXPI is a truly “new” name to Narwhal portfolios.
As technology continues to miniaturize, Intel (ticker INTC) continues to demonstrate a lead on its competition as the firm strives to preserve Moore’s Law. While the market is concerned that this will result in ever-rising capital expenditures, the bears have been proclaiming such a thesis for years. The more relevant measure is to look at gross margin through the cycle and our view is that gross margin is materially higher than it was at similar points in prior cycles. This is good news and evidence that INTC’s competitive position is strong and actually improving.
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