This is a Guest Post by AK of Fallible
AK has been an analyst at long/short equity investment firms, global macro funds, and corporate economics departments. He co-founded Macro Ops and is the host of Fallible.

It’s that time again. Here are the 3 stocks we’re looking at for July — Micron (MU), Intel (INTC), and Advanced Micro Devices (AMD).

In our June video we talked about Google (GOOGL), Amazon (AMZN), and Facebook (FB) because strong momentum stocks are the place to be in this stage of the bull market. We explained why with concepts like investor herding, and how our psychology encourages us to invest with the group.

It’s interesting though that many investors avoid these momentum names and other FAANGs because of the belief that the trade is overcrowded and the trend is old. They’re scared off by the big numbers, thinking the trend can continue. But in reality, when taking into account these companies massive networking affects, their constant reinvestment, and rapid compounding growth, they are actually trading way below their market valuations. So in this case, the popular opinion is the way to invest.

There’s another area of the market that’s similarly misvalued — semiconductors. Semis, just like tech, have more than tripled the market’s return year to date. These companies have solid fundamentals backing them and yet they’re still being misvalued by the market.

The popular narrative over the last two years has been that the semi industry is very late in its capital cycle and is headed for a wall. Semi’s usually follow a short capital cycle, where eventually chip capacity exceeds demand which leads to lower pricing and collapsing margins. Because the cycle has gone on for so long, investors expect this to happen right around now.

But the data doesn’t confirm this idea. In fact, the data says semis are still running strong in terms of earnings and revenue. The reason why is because of secular change in demand due to the raise of AI.

To learn more, make sure you watch the video above!

And as always, stay Fallible out there investors!

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