| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | - | 23.1% |
Ashva Capital generated a 23.1% net return through June 2026, outperforming the S&P 500's 9.6% gain. The manager attributes performance to disciplined positioning through first-quarter volatility and participation in the second-quarter recovery as fundamentals reasserted themselves. The portfolio has evolved toward favoring businesses with improving earnings, free cash flow, and fundamental momentum rather than simply waiting for cheap businesses to appreciate. Micron Technology, the fund's largest position, exemplifies this approach. The manager believes the memory semiconductor cycle is structurally improving due to AI-driven demand for high-bandwidth memory, DRAM, and NAND storage, combined with Micron's strategic customer agreements covering approximately $100 billion of revenue with take-or-pay provisions. These agreements reduce traditional cyclical risk by securing volume and pricing visibility before capacity is built. While Micron remains cyclical, the manager believes normalized earnings may settle materially above historical levels, creating an asymmetric opportunity where improving business quality and earnings power are not yet reflected in valuation. The broader market outlook remains constructive, supported by exceptionally strong S&P 500 earnings growth of 50.4% year-over-year, with breadth across all eleven sectors. The manager maintains a concentrated portfolio, uses options to complement long-term equity ownership, and emphasizes that risk is permanent capital impairment rather than temporary price volatility.
The manager's core thesis is that disciplined, concentrated investing in high-quality businesses with improving fundamentals and reasonable valuations can generate attractive long-term returns while avoiding permanent capital impairment. The manager has evolved toward favoring businesses where earnings, free cash flow, and underlying economics are improving—what they term fundamental momentum—rather than simply buying cheap businesses and waiting. Micron Technology exemplifies this approach: a historically cyclical business whose economics may be structurally improving due to AI-driven memory demand, contracted supply agreements with take-or-pay provisions, and manufacturing capacity constraints. The manager believes Micron's normalized earnings power may settle materially above historical levels, while the market continues to price the stock as if current profitability represents a cyclical peak that will revert to historical norms.
The manager views the forward outlook as constructive, supported by unusually strong and improving earnings fundamentals across the S&P 500. While acknowledging that valuations are not cheap and certain areas exhibit speculative characteristics, the manager believes the market advance is being justified by genuine earnings growth rather than multiple expansion. The manager expects the current earnings expansion to persist beyond a single quarter, supported by broad positive revisions and guidance. For Micron specifically, the manager believes normalized earnings may settle at levels materially above historical norms due to structural improvements in the memory cycle, though the business remains cyclical and subject to risks.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Aug 7 2026 | 2026 Q2 | AMZN, GOOGL, MU | AI, Concentration, earnings, GARP, growth, Memory, Quality, semiconductors | MU | Ashva Capital returned 23.1% net through June 2026 versus 9.6% for the S&P 500, driven by concentrated positioning in Micron Technology and disciplined participation in the market recovery. The manager believes the memory semiconductor cycle is structurally improving due to AI demand and contracted supply agreements, creating an asymmetric opportunity where Micron's improving business quality and earnings power are not yet reflected in valuation. The broader market outlook remains constructive, supported by exceptionally strong earnings growth. |
| May 6 2026 | 2026 Q1 | GM | AI, Buybacks, large cap, oil, technology, value, volatility | GM | Ashva Capital rebounded strongly in April after Q1 volatility, outperforming the S&P 500 YTD. The manager views market weakness from oil disruption as temporary, maintaining secular bull market thesis. Strategy focuses on high-quality businesses with strong cash flow and shareholder-friendly capital allocation, using volatility as opportunity while staying selective on AI investments given disruption risks. |
| Jan 29 2026 | 2025 Q4 | AAPL, AMD, AMZN, COST, CSCO, DIS, GOOGL, HIMS, META, MU, NFLX, NVDA, PLTR, SPOT, UBER, WMT, ZG | AI, Compounding, long-term, Quality, semiconductors, technology, US, value |
MU AMD DIS |
Ashva Capital underperformed in 2025 by avoiding overvalued mega-caps, instead focusing on quality businesses like Micron, AMD, and Disney at reasonable prices. The manager emphasizes that compounding requires survival through cycles, not perfect timing. Using Buffett's playbook of valuation discipline and patient capital, Ashva targets long-term wealth creation over short-term performance chasing. |
| Oct 12 2025 | 2025 Q3 | DIS, HOOD, XLF | Compounding, financials, Fintech, long-term, Streaming, value |
XLF DIS HOOD |
Ashva Capital gained 10.16% in Q3 2025 through long-term focused investing in quality businesses. Core holdings XLF, Disney, and Robinhood offer exposure to financial sector recovery, streaming transformation, and fintech disruption respectively. The manager emphasizes staying fully invested and compounding over decades rather than reacting to short-term volatility, maintaining conviction in these positions' long-term potential. |
| Jul 8 2025 | 2025 Q2 | CRDO, HOOD, HWM | aerospace, Concentration, Data centers, Fintech, long-term, Quality |
HOOD CRDO HWM HOOD CRDO HWM |
Ashva Capital's concentrated portfolio of quality compounders underperformed in H1 2025 (-1.55% vs S&P +5.5%) but rebounded strongly in Q2. Top positions in disruptive fintech (Robinhood), AI infrastructure (Credo), and aerospace recovery (Howmet) reflect the fund's long-term, business-first approach. Management expects fundamentals to reassert over narrative-driven markets, positioning for outperformance. |
| May 2 2025 | 2025 Q1 | IBN, LRN, UBER | Compounding, Drawdown, India, Quality, rates, tariffs, value, volatility |
LRN IBN UBER |
Ashva Capital's concentrated portfolio of quality compounders underperformed during Q1's violent rotation from long-duration assets to cyclicals amid tariff fears and rising rates. Despite painful 13.6% decline versus market's 4.6% drop, the manager maintains conviction in holdings like Stride, ICICI Bank, and Uber, believing current price-value gaps create exceptional forward return profiles for disciplined long-term investors. |
| Jan 9 2025 | 2024 Q4 | GM | AI, fundamentals, inflation, long-term, technology, value | - | Ashva Capital delivered 26.5% net returns in 2024, outperforming by 3.2% through disciplined value investing focused on undervalued businesses with strong cash flows. Despite acknowledging stretched valuations and persistent inflation, the fund maintains equity exposure and AI-tech allocation. The long-term approach assumes 10% annual S&P returns going forward versus recent 13% pace. |
| Oct 31 2024 | 2024 Q3 | MO | Bull Market, Intrinsic Value, long-term, Outperformance, US, value | MO | Ashva Capital outperformed the S&P 500 in Q3 2024 by focusing on intrinsic value and companies with high returns on capital rather than statistically cheap stocks. The fund holds positions like Altria and expects continued market strength through year-end, driven by US economic resilience and reduced election uncertainty. |
| Jul 28 2024 | 2024 Q2 | GM | Autos, Buybacks, Leverage, Options, Quality, value | GM | Ashva Capital outperformed with 21% net returns versus S&P 500's 14.5% through a Buffett-inspired quality value strategy enhanced by options leverage. Strong US fundamentals including robust employment, moderating inflation, and concluded Fed tightening cycle support continued bull market. Strategic GM position exemplifies approach of leveraging undervalued quality companies with strong cash flow generation and aggressive capital returns. |
| May 2 2024 | 2024 Q1 | - | earnings, Quality, US, value | - | Ashva Capital outperformed the S&P 500 by 640 basis points in Q1 2024 using a QARP strategy targeting undervalued stocks with overly pessimistic analyst coverage. The manager emphasizes removing emotions from investment decisions and focuses on bottom-up analysis rather than macro forecasting, expressing confidence in current positions. |
| Feb 29 2024 | 2023 Q4 | BLDR, META, NVDA, NVR, RCL, UBER | Fed policy, Goldilocks, Housing, Recession, Soft Landing, technology | - | Ashva Capital returned 16.18% in 2023 betting against recession fears and on housing shortages. Manager correctly called the Fed's soft landing while investing in structural housing demand from millennials facing decades of supply constraints. Expects current bull market to broaden beyond tech, drawing parallels to late 1990s Goldilocks economy. |
| Nov 17 2023 | 2023 Q3 | - | Bull Market, consumer spending, inflation, interest rates, US Economy | - | Ashva Capital sees the US economy entering a sustained expansion phase despite structural differences from the 1990s Goldilocks period. Strong consumer spending, robust labor markets, and declining inflation create foundations for a multi-year bull market. The fund's strategic positioning reflects confidence in continued economic growth, with extremely low recession probability heading into 2024. |
| Feb 28 2023 | 2022 Q4 | BTI, MO | - | - | |
| Mar 11 2022 | 2022 Q3 | META | - | - | |
| Jun 30 2022 | 2022 Q2 | - | - | - | |
| Mar 30 2022 | 2022 Q1 | ADBE | - | - |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q2 |
Semiconductor CycleThe manager views the memory semiconductor cycle as structurally improving due to AI-driven demand and contracted supply agreements. Micron Technology has entered 16 strategic customer agreements covering approximately 20% of DRAM and one-third of NAND volume with take-or-pay provisions, reducing traditional cyclical risk. AI infrastructure is simultaneously increasing memory demand while consuming manufacturing capacity, creating scarcity that may make future downturns less severe than historical cycles. |
Memory DRAM NAND HBM Cyclical |
AIAI is described as a critical driver of memory demand, particularly high-bandwidth memory (HBM) for AI accelerators. The manager emphasizes that AI infrastructure requires HBM, conventional data-center DRAM, and enormous quantities of NAND storage, with industry data-center DRAM and NAND bit shipments expected to more than double 2024 levels by 2026. The manager favors companies where AI strengthens the business model and expands the opportunity set, positioning Micron as a direct beneficiary. |
HBM Accelerators Infrastructure Data Centers Hyperscalers | |
EarningsThe manager highlights extraordinarily strong S&P 500 earnings growth, with 86% of companies exceeding estimates and aggregate earnings 29.2% above consensus—potentially the largest surprise since 2008. Blended year-over-year earnings growth reached 50.4%, and even excluding Alphabet and Amazon, growth was 32.0%. All eleven sectors reported year-over-year earnings growth, with ten showing double-digit growth. The manager concludes that the market advance is being supported by unusually strong and improving fundamentals. |
Surprises Growth Fundamentals Profit Margins | |
QualityThe manager has evolved toward favoring businesses where earnings, free cash flow, and underlying economics are improving rather than merely waiting for cheap businesses to get better. The letter emphasizes high-quality businesses at reasonable valuations with fundamental momentum, preferring good businesses with substantial growth ahead over great businesses whose strongest growth is behind them. This represents a shift toward GARP investing that combines business quality, growth, valuation, and fundamental momentum. |
Free Cash Flow GARP Fundamental Momentum | |
Risk AppetiteThe manager maintains a concentrated portfolio as an intentional feature, with Micron as the largest position. Concentration is framed as necessary for meaningful differentiation from indices, with position sizing reflecting assessments of downside, balance-sheet strength, valuation, and business durability. The manager distinguishes between volatility (price movement) and risk (permanent capital impairment), emphasizing that volatile share prices are not reasons to sell unless the underlying thesis deteriorates. |
Concentration Position Sizing Downside Protection | |
| 2026 Q1 |
AIAI remains one of the most important investment themes but also one of the most difficult to underwrite. It creates enormous opportunities for certain companies while creating real disruption risk for others, particularly in software. The manager takes a selective approach, looking for companies where AI either strengthens the business model or is unlikely to materially impair core economics. |
Artificial Intelligence Software Disruption Technology |
BuybacksThe manager likes companies that repurchase shares when trading below intrinsic value, viewing this as disciplined capital allocation that creates a quiet, powerful tailwind for long-term owners. General Motors is cited as a good example of aggressive share count reduction at attractive valuations. |
Share Repurchases Capital Allocation Shareholder Returns | |
VolatilityThe manager distinguishes between volatility and risk, viewing volatility as price movement while risk is permanent capital impairment. Market volatility is seen as creating opportunities when durable businesses with strong fundamentals sell off sharply, allowing disciplined investors to use volatility as an ally. |
Market Volatility Risk Management Opportunity | |
OilThe recent oil supply disruption from Middle East war caused market weakness and inflation fears. While described as serious, the manager notes it's not unprecedented compared to historical oil shocks like 1973 and 1979. The US position as the world's largest oil producer changes the strategic impact compared to past decades. |
Energy Geopolitical Risk Supply Disruption | |
| 2025 Q4 |
Live SportsManager sees significant value in sports teams and entertainment assets, citing strong viewership numbers and global interest. Recommends Atlanta Braves, Madison Square Garden Sports, Manchester United, and Rogers Communications as undervalued relative to private market values. Views sports as hot investment category with institutional interest growing. |
Sports Teams Entertainment Media Rights Valuation |
MediaBullish on media companies with sports content and live programming. Highlights Fox's strong position in NFL and MLB rights, plus World Cup coverage. Notes Versant Media Group spin-off creates buying opportunity due to index fund selling. Emphasizes value of live content in advertising market. |
Broadcasting Content Advertising Spin-offs | |
Natural GasPositive on National Fuel Gas due to strategic Appalachian Basin acreage and regulated utility operations. Notes 33% of US gas comes from Appalachia and sees unappreciated value in reserves near population centers. Expects company to benefit from increasing free cash flow and potential corporate actions. |
Utilities Energy Infrastructure Reserves Cash Flow | |
AIAcknowledges AI as transformative but warns of potential disappointment for investors. Compares to late 1990s tech boom with multiple speculative solutions. Expects volatility and potential 'Deep Seek' moments that could rattle markets. Views AI as touching everything but requiring careful stock selection. |
Technology Disruption Speculation Volatility | |
AerospaceSees value in Albany International's aerospace composites business, particularly lightweight components for LEAP engines. Notes strategic alternatives exploration could unlock value through potential spin-off and eventual acquisition by aerospace company. Views defense exposure as additional positive catalyst. |
Defense Composites Restructuring Spin-offs | |
| 2025 Q3 |
Capital MarketsThe fund holds XLF for diversified exposure to America's financial sector including banks, insurance, capital markets, mortgage REITs, and consumer finance companies. The manager expects the sector to benefit from declining interest rates, resilient credit quality, and potential yield curve steepening, with Q3 earnings expected to grow roughly 10% on revenue growth of nearly 6%. |
Banks Insurance Yield Curve Credit Margins |
StreamingDisney's transformation continues with direct-to-consumer revenue growing 6% and streaming subscribers rising to 183 million. Management is focused on the upcoming ESPN direct-to-consumer service launch and Hulu integration into Disney+. The manager believes Disney's streaming ecosystem potential remains underappreciated by the market. |
Disney+ ESPN Hulu Subscribers Content | |
FinTechRobinhood continues disrupting traditional financial services by evolving from a zero-commission trading platform into a broader ecosystem spanning brokerage, crypto trading, retirement accounts, savings and checking products, and credit cards. The strategy focuses on deepening customer engagement and expanding wallet share through cross-selling and international growth. |
Trading Crypto Wallet Share Cross-selling Digital | |
| 2025 Q2 |
FinTechRobinhood is positioned as a disruptive financial platform rewriting consumer finance rules. The newly launched Robinhood Gold credit card with 3% cash back is viewed as a brilliant customer acquisition tool that leverages the company's lack of legacy cost structure compared to traditional banks. Robinhood is seen as a Trojan horse in retail finance, rapidly expanding its ecosystem beyond just brokerage services. |
Digital Banking Credit Cards Customer Acquisition Platform Disruption |
Data CentersCredo Technology operates in high-performance connectivity and data infrastructure space. As AI workloads explode and data centers scale up, Credo's low-power, high-efficiency solutions are becoming increasingly mission-critical. The company is positioned to benefit from secular trends in hyperscale data transmission and edge computing. |
AI Infrastructure Connectivity High Performance Edge Computing Hyperscale | |
AerospaceHowmet Aerospace is a precision-engineered aerospace and defense supplier that benefits from long product cycles and high switching costs. Its exposure to both commercial and military aircraft demand creates a durable earnings stream. The company is valued for strong fundamentals, disciplined capital allocation, and margin expansion potential as the aviation cycle continues recovering post-COVID. |
Defense Commercial Aviation Switching Costs Capital Allocation Recovery | |
| 2025 Q1 |
EducationStride Inc. represents a direct beneficiary of the secular shift toward online and hybrid education models, operating a high-margin, recurring revenue business with consistent enrollment growth and underappreciated optionality in adult learning and career prep divisions. |
Online Learning Education Technology Recurring Revenue Adult Learning Career Prep |
IndiaICICI Bank is positioned as one of the highest-quality private banks in India with improving asset quality and capital efficiency, serving as a structural beneficiary of India's digital and credit expansion while trading at a discount despite 15-20% earnings growth. |
Private Banks Digital Banking Credit Expansion Asset Quality Capital Efficiency | |
MobilityUber Technologies has transitioned from cash-burning startup to free cash flow machine with accelerating operating leverage, emerging as a leader in mobility and delivery logistics with significant pricing power and underappreciated growth drivers in Uber Freight and international expansion. |
Ride Sharing Delivery Logistics Operating Leverage Pricing Power International Expansion | |
| 2024 Q4 |
AIThe fund increased exposure to AI-related stocks as part of their strategic tech allocation. AI technology continues to improve but there is no concrete proof that AI models outperform human predictions in complex systems like financial markets. |
Technology Growth Innovation |
| 2024 Q3 |
ValueThe fund focuses on intrinsic value rather than market sentiment or temporary price metrics. They emphasize investing in companies with high returns on invested capital and strong free cash flow growth to identify genuinely undervalued stocks rather than just statistically cheap ones. This approach allows them to avoid the boom-bust cycle that affects traditional value investors. |
Intrinsic Value Free Cash Flow ROIC Undervalued Value Investing |
| 2024 Q2 |
BuybacksGM announced a new $6 billion stock repurchase program in June 2024, representing roughly 11% of its total market capitalization. This followed completion of a $10 billion share repurchase program announced in November 2023. The manager views these aggressive buybacks as evidence of undervaluation despite GM shares being up 38% year-to-date. |
Share Repurchase Capital Return Undervaluation Cash Flow |
QualityThe manager employs a Quality at a Reasonable Price (QARP) strategy, focusing on well-managed businesses with competitive advantages, robust free cash flow, and reasonable valuations. This approach mirrors Buffett's preference for safe, high-quality companies that are profitable, stable, and growing. The strategy emphasizes businesses that can sustain earnings growth through economic cycles. |
QARP Competitive Advantages Free Cash Flow Stable Growth | |
| 2023 Q4 |
HomebuildersManager believes millennials reaching home ownership age face a housing shortage that could last decades due to insufficient construction following the 2008 housing bubble. This structural shortage supports long-term investment in housing-related companies. |
Housing Construction Demographics Supply Millennials |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Aug 7, 2026 | Fund Letters | Ashva Capital Management | MU | Micron Technology | Other | Semiconductors | Bull | - | Artificial Intelligence, Cyclical, data center, DRAM, Equity, Free Cash Flow, HBM, Memory, Nand, semiconductors, supply constraints, take-or-pay contracts, Value | Login |
| May 6, 2026 | Fund Letters | Ashva Capital Management | GM | General Motors Company | Auto Manufacturers | Automobile Manufacturers | Bull | New York Stock Exchange | Automaker, capital allocation, contrarian, Cyclical, Electric Vehicles, Free Cash Flow, Share Buybacks, Value | Login |
| Jan 29, 2026 | Fund Letters | Ankur Shah | MU | Micron Technology, Inc. | Information Technology | Semiconductors | Bull | NASDAQ | AI, Free_cash_flow, Memory, Pricing_Discipline, semiconductors | Login |
| Jan 29, 2026 | Fund Letters | Ankur Shah | AMD | Advanced Micro Devices, Inc. | Information Technology | Semiconductors | Bull | NASDAQ | AI, data centers, Execution, semiconductors, Share_Gains | Login |
| Jan 29, 2026 | Fund Letters | Ankur Shah | DIS | The Walt Disney Company | Communication Services | Media & Entertainment | Bull | New York Stock Exchange | cashflow, Intellectual_Property, media, Parks, Streaming | Login |
| Oct 12, 2025 | Fund Letters | Ankur Shah | XLF | Financial Select Sector SPDR Fund | Other | Financials ETF | Bull | NYSE | Banks, dividends, ETF, financials, Macro, Value | Login |
| Oct 12, 2025 | Fund Letters | Ankur Shah | DIS | The Walt Disney Co. | Communication Services | Media & Entertainment | Bull | NYSE | cash flow, entertainment, growth, media, restructuring, Streaming | Login |
| Oct 12, 2025 | Fund Letters | Ankur Shah | HOOD | Robinhood Markets Inc. | Financials | Capital Markets | Bull | NASDAQ | banking, Brokerage, diversification, Fintech, growth, platform | Login |
| Jul 9, 2025 | Fund Letters | Ashva Capital Management | HOOD | Robinhood Markets | Diversified Financial Services | Investment Banking & Brokerage | Bull | NASDAQ | Brokerage, cost structure, credit card, Customer Acquisition, Disruptive Platform, Fintech, Retail Finance | Login |
| Jul 9, 2025 | Fund Letters | Ashva Capital Management | CRDO | Credo Technology | Technology Hardware & Equipment | Semiconductors & Semiconductor Equipment | Bull | NASDAQ | AI infrastructure, connectivity solutions, data centers, Edge computing, hyperscale, Low Power, semiconductors | Login |
| Jul 9, 2025 | Fund Letters | Ashva Capital Management | HWM | Howmet Aerospace | Capital Goods | Aerospace & Defense | Bull | NYSE | Aerospace, Aviation Recovery, capital allocation, Defense, high switching costs, margin expansion, Precision Engineering | Login |
| Jul 8, 2025 | Fund Letters | Ankur Shah | HOOD | Robinhood Markets, Inc. | Financials | Investment Banking & Brokerage | Bull | NASDAQ | Brokerage, Customer_acquisition, Digitalization, Fintech, Unit_economics | Login |
| Jul 8, 2025 | Fund Letters | Ankur Shah | CRDO | Credo Technology Group Holding Ltd | Information Technology | Semiconductors | Bull | NASDAQ | Ai_infrastructure, Data_centers, High_margin_growth, hyperscalers, semiconductors | Login |
| Jul 8, 2025 | Fund Letters | Ankur Shah | HWM | Howmet Aerospace Inc. | Industrials | Aerospace & Defense | Bull | NYSE | Aerospace, Defense, Free_cash_flow, Margin_expansion, Switching_costs | Login |
| May 2, 2025 | Fund Letters | Ashva Capital Management | LRN | Stride Inc. | Consumer Discretionary | Education Services | Bull | NYSE | Adult Education, Career Preparation, Digital transformation, education technology, high-margin business, online learning, recurring revenue | Login |
| May 2, 2025 | Fund Letters | Ashva Capital Management | IBN | ICICI Bank | Financials | Banks | Bull | NYSE | asset quality, capital efficiency, credit expansion, digital banking, Emerging markets, Indian Banking, Private Bank, Value | Login |
| May 2, 2025 | Fund Letters | Ashva Capital Management | UBER | Uber Technologies | Communication Services | Interactive Media & Services | Bull | NYSE | Delivery Logistics, Free Cash Flow, freight transportation, international expansion, Mobility Platform, network effects, operating leverage, Pricing power | Login |
| Oct 1, 2024 | Fund Letters | Ashva Capital Management | MO | Altria Group Inc | Consumer Staples | Tobacco | Bull | NYSE | cash flow, consumer staples, defensive, dividend, smokeless products, tobacco, Value | Login |
| Jul 1, 2024 | Fund Letters | Ashva Capital Management | GM | General Motors Company | Consumer Discretionary | Automobile Manufacturers | Bull | NYSE | Automobile Manufacturers, call options, capital return, Electric Vehicles, Free Cash Flow, ICE Vehicles, leverage, share repurchase, undervalued, Value | Login |
| TICKER | COMMENTARY |
|---|---|
| MU | Our largest position is Micron Technology (MU). At first glance, that might appear unusual for a strategy centered on predictable cash flows and high-quality businesses. Memory semiconductors have historically been anything but predictable. The industry has traditionally followed a brutal cycle. Strong demand causes memory prices and manufacturer profits to rise. High profits encourage additional capacity. Supply eventually exceeds demand, memory prices collapse and profits disappear. Investors, therefore, learn very quickly not to forecast peak memory earnings as though they will continue indefinitely. However, we believe something important may be changing now. Not that the memory cycle has disappeared - it has not. Rather, the economics of the cycle may be becoming structurally more attractive. High-bandwidth memory, or HBM, is critical to AI accelerators. But focusing solely on HBM understates the opportunity. FactSet's latest Q2 data reinforce the strength of the broader semiconductor cycle: Semiconductors & Semiconductor Equipment are reporting 135% year-over-year earnings growth and 77% revenue growth, making semiconductors the largest contributor to Information Technology sector earnings growth. Micron itself reported FY Q3 2026 (Quarter ending June 30) adjusted EPS of $25.11 versus the $20.86 consensus estimate. AI infrastructure requires HBM, conventional data-center DRAM and enormous quantities of NAND storage. Micron expects industry data-center DRAM and NAND bit shipments in 2026 to more than double their 2024 levels. Meanwhile, producing increasingly sophisticated HBM itself consumes more DRAM wafer capacity. New memory fabrication plants take years to construct and require scarce equipment, skilled workers, power and permitting. Samsung expects shortages to extend into 2028. AI is simultaneously increasing demand for memory while consuming more of the manufacturing capacity required to produce it. This is exactly the distinction we emphasized last quarter: we have no interest in owning technology merely because it is technology. We want businesses where future cash flows justify the current valuation. Scarcity alone, however, would not justify making Micron our largest position. Something more interesting is happening. Micron's customers increasingly want certainty of supply, and they are willing to pay for it. Micron has entered into 16 strategic customer agreements across data-center, consumer and automotive markets. These agreements cover approximately 20% of DRAM volume and one-third of NAND volume during their respective terms, and all contain take-or-pay provisions. Management expects approximately half or more of future revenue eventually to be covered by strategic customer agreements once planned agreements are completed. Fourteen agreements cover approximately $100 billion of cumulative revenue at minimum prices, while signed agreements include approximately $22 billion of projected customer deposits and related financial commitments. We view this development as potentially transformative. Historically, a memory manufacturer might spend billions of dollars constructing capacity based upon expected future demand, only to discover when the factory finally came online that competitors had done exactly the same thing. Supply would overwhelm demand and economics would deteriorate. Micron is increasingly getting customers to make commitments before it builds. Customer deposits can help finance capacity expansion while take-or-pay agreements provide greater visibility into future volume and pricing. That reduces the risk of constructing expensive fabrication capacity based solely upon an optimistic spot-market forecast. The memory business remains cyclical. But contracted scarcity may make the next downcycle look different from prior ones. That is the heart of our investment thesis. In fiscal Q3, Micron generated approximately $41.5 billion of revenue, an 84.9% non-GAAP gross margin, an 81.2% operating margin and $25.11 of adjusted EPS. More important to us, the company generated approximately $18.3 billion of adjusted free cash flow after investing $7.1 billion in net capital expenditures. Micron finished the quarter with approximately $24.4 billion of net cash. Micron is currently trading at approximately 12x FY26E EPS and 5.7x FY27E EPS. The market is therefore not ignoring Micron's extraordinary profitability. Quite the opposite. It appears to assume that today's earnings are simply another memory-cycle peak and will eventually revert to historical norms. That may prove correct. But we believe the probability of a different outcome has increased materially. AI has made memory strategically more important, HBM is consuming greater manufacturing capacity, conventional DRAM supply is tightening, and Micron's customer agreements are creating greater visibility into future volumes, pricing, and returns on new capacity. The business remains cyclical, but the cycle's structure may be improving. This does not mean Micron deserves a permanently elevated multiple on peak earnings. It means normalized earnings may ultimately settle at levels materially above the historical earnings investors are using as their mental anchor. We are therefore not simply buying a cheap stock. We believe we are buying a business whose quality, earnings power, and predictability may all be improving simultaneously, while its valuation continues to reflect considerable scepticism that those improvements will persist. That combination - fundamental momentum, improving business quality, and a valuation that discounts substantial mean reversion - is precisely the type of asymmetric opportunity we seek at Ashva Capital. It is why Micron is our largest position. Micron remains cyclical. DRAM and NAND pricing could decline. Hyperscalers could reduce AI spending. Competitors could build too much capacity. Micron could experience manufacturing problems with HBM4 or HBM4E. Korean competition could intensify. We therefore intend to follow the evidence rather than fall in love with the story. Among the developments that would cause us to reconsider the position are sustained declines in DRAM and NAND pricing, significant deterioration in gross margins before new supply becomes available, weakening data-center demand while capital expenditures continue rising, or material reductions in expected fiscal 2027 earnings. This connects directly to a distinction we emphasized in Q1: volatility is the price moving around; risk is permanent impairment of capital. A volatile Micron share price is not, by itself, a reason to sell. A deterioration in the economics supporting our thesis would be. Every investment thesis eventually encounters facts that challenge it. Our job is not to defend the thesis. Our job is to defend our partners' capital. Micron also illustrates a broader evolution in how we think about GARP investing. Micron may be our largest position, but that does not make it sacred. |
| GOOGL | Extraordinary non-operating gains at Alphabet and Amazon materially inflate that figure. Excluding those two companies, however, earnings growth would still be 32.0% - hardly a weak result. The blended S&P 500 net profit margin stands at 16.9%; even excluding Alphabet and Amazon, it would be 15.0%, still the highest level since FactSet began tracking the metric in 2009. |
| AMZN | Extraordinary non-operating gains at Alphabet and Amazon materially inflate that figure. Excluding those two companies, however, earnings growth would still be 32.0% - hardly a weak result. The blended S&P 500 net profit margin stands at 16.9%; even excluding Alphabet and Amazon, it would be 15.0%, still the highest level since FactSet began tracking the metric in 2009. |
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