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Saturday, March 02, 2019

Keysight: Semiconductor Arms Dealer or Picks and Shovel Maker, Consider KEYS

Yesterday Barron's ran an article Forget the Cool New Products; Buy the "Arms Dealers" The article recommended several of my favorite semiconductor and semiconductor capital equipment stocks that make possible the semiconductors in these new products but it left off one of my new favorites, Keysight Technologies, KEYS. 

I have made a lot of money with several of these stocks over the past 20 plus years I've covered them in my newsletter as makers of  "picks and shovels."  This is the same idea as "Arms Dealers" but I think better reflects my California roots where gold miners came here in the mid 1800s to make their fortune mining gold.  Very few minors made great fortunes but those selling them "picks and shovels"  and "Levi's Jeans" made money from all miners, not just those who struck gold.
As a shareholder of Agilent (A Chartssince its IPO, I was well aware of the quality of Keysight's products when Agilent spun-off Keysight.  I started accumulating more shares when it fell using profits taken in other stocks. 

It was tough accumulating more Keysight shares after its IPO & spin-off from Agilent due to the falling price and low analyst interest. Analysts did not have an estimate of forward earnings growth estimates until sometime between 2017 or 2018.  Data from my newsletters going back two years:

KEYS 5-yr Growth Estimate as of: 

  • 1/18/17 =  None!
  • 1/18/18 = 8.66%
  • 1/16/19 = 18.35%

Here is an excerpt from my 2017 newsletter to show what I mean

It looked "expensive" based on PE and PEG until recently when, of course, analysts joined me in seeing the potential and gave it a decent growth rate so next year's PEG was 1.05 when I did the February newsletter calculations.

As tough as it was accumulating... I've taken some profits (at $80) and watch it go higher but we did get some shares back late last year for the portfolio at a great price so it made taking profits easier.

The "Explore Portfolio" covered in Kirk Lindstrom's Investment Letter closed Friday at another record high!
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