The hunt for a brand new telephone or automobile might get extra irritating.
Investor Paul Meeks warns Wall Road is underestimating the semiconductor shortage. He believes it’s going to take years as a substitute of months to get resolved.
“This might be a problem that persists deep into 2023,” the Unbiased Options Wealth Administration portfolio supervisor informed “Trading Nation” on Friday.
Meeks, recognized for working the world’s largest expertise fund for Merrill Lynch through the dot-com bubble, expects a painful fallout.
“Some of these companies actually will not be able to ship units. And if they can’t ship units, they might disappoint on their earnings,” he mentioned. “Their stocks are so expensive that they could go down. Not go down a bit, they could go down a lot.”
Whereas company America and customers strive to deal with the availability chain frustration, semi shares are rallying. The VanEck Vectors Semiconductor ETF, which tracks the group, is up 35% during the last six months.
Meeks overweighted chipmakers in early June 2020 — months earlier than provide shortages made entrance web page information. He predicts the shares have much more room to run.
“I also like semiconductor capital equipment,” he mentioned. “But you have to be a sharpshooter because not only do you have to judge if their products are in favor or out of favor… you also have to figure out who has best executed their supply chains.”
Meeks lists Broadcom and Microchip Know-how as examples of firms that efficiently tailored their order processes previous to the depths of Covid-19.
Whereas Meeks is constructive on semiconductors, he is nervous about FAANG, significantly Apple.
“About 50% of their business still comes from the iPhone,” famous Meeks, who additionally teaches finance at The Citadel. “They have a great shortage that has cost them many billions of dollars of revenue last quarter.”
He sees the problems ramping up this vacation season and plenty of disillusioned customers who will not get purchases on time.
‘There’s not any reduction’
“It’s a bummer and unfortunately, there’s not any relief,” mentioned Meeks. “It’ll also hit the top and bottom lines of some of these vendors that are selling those hot Christmas products.”
“And, [it] doesn’t have Facebook’s regulatory issues,” he added. “Frankly, the rest of the FAANGs, I would maybe hold if you held them. But I wouldn’t buy them with fresh cash.”
Meeks would also stick with Microsoft.
“It’s obviously very expensive particularly for a company that has never traded at these kind of valuation multiples,” said Meeks. “But they’re doing all the right things. Brilliantly managed.”
Microsoft shares are up 15% over the past month and 51% so far this year.
Disclosure: Meeks owns Apple, Microsoft, Alphabet, Meta Platforms, Amazon, Broadcom Technology, Microchip, Taiwan Semiconductor, Applied Materials.
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