Motley Fool: Good memory

Micron (Nasdaq: MU) is a leading provider of memory semiconductor chips and data storage technology. Its products are primarily used in personal computers, but it’s seeing growing demand for chips to be used in data centers, 5G-enabled devices and even electric vehicles. Micron’s revenue grew 29% in fiscal 2021, and management expects record revenue in fiscal 2022.

The company is optimistic about the near-term outlook in the personal computer market, which is experiencing healthy demand right now, with consumers buying multiple PCs per household. In addition, there’s growing demand for Micron’s products from data centers. Major companies engaged in cloud computing, such as Microsoft and Amazon, are spending billions of dollars on cloud infrastructure, and that’s a long-term growth driver for Micron’s solid-state drives (SSDs) used in data servers. Sales of NAND, a type of nonvolatile flash memory used in SSDs, made up 24% of Micron’s revenue in the most recent quarter.

Micron’s stock price has been looking attractive, with a recent forward-looking price-to-earnings (P/E) ratio around 10; it also has a small dividend, recently yielding 0.22%. (Assuming the company performs well in coming years, it’s likely that the dividend will be increased.) Analysts expect the company’s earnings to grow by an average 24% per year over the next five years. This is a cyclical business that can be volatile from year to year, but long-term investors are likely to profit.

Ask the Fool

Q: What are the “comps” I see mentioned in some reports from retailers? – H.F., Lancaster, Pennsylvania

A: Sometimes referred to as “same-store sales,” comps (short for comparables, or comparable-store sales) are sales that occurred at stores that have been open a year or more. Imagine that PieMart, Inc. (ticker: GOBBL) reports sales of $100 million in 2021 and $200 million in 2022. That sure seems terrific – 100% growth! But what if PieMart had 10 stores open in 2021 and 20 open in 2022? If its same-store sales for 2022 came in at $100 million, then sales at its stores open for at least a year were flat, with 0% growth.

Retailers opening new stores are likely to see total sales increase simply because of the new locations. Comps give you a more realistic, apples-to-apples view of how well the business is doing. Ideally, retailers will be increasing sales at existing stores while opening new ones. It’s a red flag if their growth comes mainly from adding stores.

Q: What’s a “full position” in a stock? – B.N., South Bend, Indiana

A: If you’re thinking you’d like to own $5,000 worth of, say, Buzzy’s Broccoli Beer (ticker: BRRRP), that would be your full position. You might buy that much and have a full position immediately, but if you think there’s a decent chance that Buzzy’s may drop in price soon, or you just don’t have $5,000 to spend now, you might establish a partial position by investing $2,500 now, with the intent of buying the remaining $2,500 later.

Buying in installments is actually a good strategy for those investing over long periods, and for those who are just starting to fill out a portfolio.

My dumbest investment

My dumbest investment was in Elon Musk’s company Tesla a few years ago. I had shares when they were around $29 apiece, and I sold them for a small profit. As Homer Simpson would say, “D’oh!” – D.F., online

The Fool responds: Electric car specialist Tesla has seen its stock soar by 12,000% over the past decade, averaging more than 60% growth annually. (For perspective, the S&P 500, which had a good decade itself, averaged 14.5% annually with dividends reinvested.)

While your decision to sell looks regrettable in the rearview mirror, it may have been smart at the time. For one thing, you did net a profit instead of a loss, which is always preferable. Think back to why you sold. Had you lost confidence in the company or its management? Had something changed, making the reason you bought no longer valid? If so, then selling was the right thing to do.

It’s not necessarily too late to make money on Tesla stock. Its shares are not exactly cheap, with a price-to-earnings (P/E) ratio recently above 165, so opinions are divided on how well it will perform in the next few years.

If you believe that Tesla will be worth much more than its recent market value (over $800 billion) in the future, consider buying. Otherwise, pass or wait for a lower entry price. You’ll find many articles on Tesla at Fool.com.