Lam Research Corp (LRCX) – Closing Long Position – up 141% vs. S&P up 38%
Lam Research Corp (LRCX: $372/share) was featured as a Long Idea on 6/12/17 and reiterated on 5/23/18. At the time of the original report, Lam Research received a Very Attractive rating. Our long thesis highlighted the firm’s understated earnings, superior profitability, and the stock’s cheap valuation.
This report, along with all of our research, utilizes our superior data to get the truth about earnings, as shown in the Harvard Business School and MIT Sloan paper, “Core Earnings: New Data and Evidence.”
During the 3+ year holding period, LRCX outperformed as a long position, rising 141% compared to a 38% gain for the S&P 500.
While the firm remains in a strong position in its industry and generates a top-quintile return on invested capital (ROIC), its valuation is no longer as appealing. Now, as the stock trades near its 52-week high, we think there are better opportunities in the current market and are closing this long recommendation.
Figure 1: LRCX vs. S&P 500 – Price Return – Successful Long Call
Sources: New Constructs, LLC and company filings
Note: Gain/Decline performance analysis excludes transaction costs and dividends.
This article originally published on August 10, 2020.
Disclosure: David Trainer, Kyle Guske II, and Matt Shuler receive no compensation to write about any specific stock, style, or theme.
 Harvard Business School features the powerful impact of our research automation technology in the case New Constructs: Disrupting Fundamental Analysis with Robo-Analysts.
 Our core earnings are a superior measure of profits, as demonstrated in Core Earnings: New Data & Evidence a paper by professors at Harvard Business School (HBS) & MIT Sloan. The paper empirically shows that our data is superior to “Operating Income After Depreciation” and “Income Before Special Items” from Compustat, owned by S&P Global (SPGI).