Double Dip- Buy Ichor Holdings for 60% Upside
Buy Ichor (NSDQ: ICHR)
Target: $36
Buy Up to: $26
We were lucky to sell Ichor last week at $28 for a 95% gain. I lamented that I hate selling a stock with great fundamentals. Lucky for us, the the stock got hit hard in the tech selling squall this week, and the market gods have given us a great entry point.
My sell last week was based entirely on the stock’s huge run. It is rare to see close to triple digit returns in less than five months, so I wanted to book that gain for subscribers.
The fundamentals of Ichor’s business are stellar. New higher estimates and incredibly bullish commentary from Ichor’s two biggest customers, Applied Materials (NSDQ: AMAT) and Lam Research (NSDQ: LRCX) give me confidence the stock will move higher and allow me to issue a new higher price target of $36.
As a refresher for those not involved in the first Ichor recommendation;
Ichor Systems’ makes the picks and shovels used to make the incredibly complex chips that power cell phones, solar panels, and thin screen TVs. It’s not a sexy business, but it is incredibly profitable.
The newly public company, which hit the market last December, offers investors a diversified way to play the rapid development of more complex chips. Its sophisticated pumps and fluid delivery systems are an integral component of semiconductor manufacturing equipment.
Its two largest customers are gaining market share and are seeing 50-60% increases in the size of the markets they serve. Chips used in increasingly autonomous vehicles and for the curved display screens in mobile phones are creating new waves of demand.
When I first recommended Ichor, there were few public estimates available. As new analysts have jumped on board and the company has reported two quarters as a public company, estimates are revving up.
Ichor should grow earnings 50% this year and at least 15% in 2018. Using a Price to Earnings multiple (P/E) of 15 on 2018’s $2.40 estimate sets the price target at $36.
Options Trade: Ichor does not trade options yet. I am working on some options trades for related companies which you will see under a separate alert.
Stock Talk
John
Linda
ANIP has been a blood bath and BGFV isn’t faring much better . I feel like we’re at a tipping point and both stocks continue to struggle. I know your take on ANIP was for more profitable 2018. But unfortunately for me I’ve grown less tolerant of the markets ups and downs as I get older and rely more and more on my portfolio for income . Your take please ….thank you
John .
Linda McDonough
Hi John and LittleBitey,
Thanks for the question. ANIP and BGFV are stocks whose industries are in transition. Drug stocks and retail are churning against, what I believe, is a long-term bottom. I hesitate to sell a stock when the fundamentals are doing well.
I don’t have a hardline on when to sell but would suggest you could put a stop loss in both positions at down 30%. Each person has a different risk tolerance and obviously as you get closer to needing the money for other things, that risk tolerance drops.
I do think the churning that we are going through right now is actually healthy. Up too much too fast is a recipe for disaster. Every stock I suggest needs to offer good value. The expectation is that if a stock is not overpriced, it will perform better in a messy market. Not always true but usually.
Impinj is a tricky stock. I’m thrilled it’s up so much but am looking through the recent news to find a way to increase my estimates. The move today is tied to Amazon’s purchase of Whole Foods. The speculation is that Impinj will provide tracking technology as Amazon shapes the grocery store of the future. I’d like to see some confirmation of that by either management.
Best,
Linda
John
Appreciate you response Linda . Thank you
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LittleBitey
Interested in feedback on John’s question as well.
On a positive note, Impinj (PI) has been doing quite well. Any advice on the future of this holding, and when selling might be appropriate?
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