In this video clip from "Semiconductor Revolution" on Motley Fool Live, recorded on March 3, Motley Fool contributor Billy Duberstein explains why Lam Research's (LRCX 1.59%) wafer fabrication equipment business is poised to benefit from the current state of the semiconductor industry, and why now may be a great time to start a position.
Billy Duberstein: I love Lam Research. It is down really hard since the beginning of the year, which is perplexing considering we're still in a semiconductor shortage and projections are for wafer fab equipment to grow something like in the mid-teens this year, and Lam is now at a 16 P/E. Its dividend's now over one. It generates 75% return on invested capital and it's part of the equipment oligopoly so yeah. I think it's down because people view Lam as highly cyclical for some reason. The semiconductor cycles in the past have been pretty violent. I don't think they're going to be as violent going forward. Now, we'll see what happens. I think if recession fears are in the air, people just sell these semiconductor equipment stocks, that's just like automatic, and the algorithms. It's down almost 200 points from Jan. 1. They didn't issue lower-than-expected guidance and they missed. But that was all on supply chain stuff. They're not able to meet demand. That I would say a high-class problem.
Jose Najarro: Problem you want to have.
Duberstein: Yeah. I would say I'm holding onto what I've got. I sold some parts at much lower valuations. I already have a pretty good-sized position, but if you don't have a position and you're looking to get in, I think it's pretty good. I would say that it can't go lower. It traded at a really low P/E ratio back in late 2018 when we were in a semiconductor crash. But we're not in a semiconductor crash right now. We're in a shortage. I would probably use this opportunity to take a position. Again, it's a volatile market, it's a volatile stock, but the business is less volatile than the how the stock behaves I think.
