HI UE,
Excellent review.
Just a note on how I've traded brks this last week.
I've sold $47.50 covered calls on 5% on my position. If the strike price is surpassed, I'll net over $50.35 in July. If they call my shares, I'll cash in 25% of my original investment. There comes a time I should be working on the market's money. Once I get my seed money back, I'll apply it to another Dividend Aristocrat, and give myself a pay raise for the next year.
If ,as I suspect, there is a down to sideways consolidation as we go into the summer, Brks will be yielding me (in a combination of dividend and call premium) greater than 5% on my whole position.
I'm completely OK to hold this solid stock and receive a 5 % yield, as it builds it revenue growth while maintaining its impressive 40 % margins on both sectors.
I'm probably out of consensus here, but I expect the semi side of their business to surprise and out perform.
Taiwan semi has committed a big capex year for 2020. Brks is the leading edge maker of tools required for the next step in semi's smaller nodes and complex chips that 5G will finally begin to ramp for both infrastructure and more importantly handsets.
No doubt Intel,will be chasing feverishly and Samsung is just a bit behind. Both buying from Brks.
When the lead fab boosts capex, the competition will soon follow.
Hopefully that strong news won't hit till my July calls expire, or I'll have a lot of cash.
Brks has made a huge strategic transition from selling the slow growth semi portion of their manufacturing portfolio, to instead the fast growth of their wide moat life sciences division.
This year their revenue has dropped but will come back,with better organic life sciences growth and a balance sheet free of debt and interest expense.
Future acquisitions in life sciences may be made and I have confidence that management will not buy another firm unless margins and revenue growth will quickly pay off the debt needed for the acquisition.
They stay on the goal of "growth, only with profitability" better than any small to midsize management team I know of.
They are a "hold for your life" stock for me. But I'll trade around the core with 5-10 percent of my position.
Doing that will yield 5% on my original purchase price,which was bought years ago as they started the life sciences division (and it kept them in negative earnings for a year or two 2015/2016).
screencast.com
Just a note of Thanks for your reviews. I do not think I would have traded the calls with out you pointing out the potential weakness on Brks for this growth year.
Bob |
