Screener A – February 7, 2025

1 Advanced Micro Devices Inc (AMD) – remains on list

First appearing on the list this month (January 2025 – Y250131), Advanced Micro Devices Inc (AMD) is a leading producer of integrated circuits. The company specializes in microprocessors for computers. The Santa Clara, CA based AMD sells chips globally, with +65% of sales (2024) to foreign business accounts. Revenues and EPS have essentially doubled since 2019-2020, as AMD has taken considerable market share from Intel in the semiconductor market. The company does not pay a dividend or repurchase stock.

2 Brown-Forman Corporation (BF-A) – remains on list

First appearing on the list in June 2024 (Y240609) and intermittently thereafter, Brown-Forman is a producer, marketer and wholesaler of alcoholic beverages. Based in Louisville, KY, the company sells in +170 countries, is the largest American-owned spirits company, and is best recognized for their Jack Daniel’s brand. Sales and EPS have grown on average ~5% YoY for the past 10 years. The company pays a steadily increasing dividend, but does not repurchase a material amount of stock. Debt to EBITDA is in the mid-2.0x range, notably lower than other global spirit makers. Brown-Forman is publicly-traded however the Brown family controls the majority of the voting shares and a +50% economic interest in the common.

3 Biogen Inc (BIIB) – remains on list

First appearing on the list in July 2019 (Y190717), Biogen Inc. is a global biopharma company with drug products that treat neurodegenerative diseases and autoimmune disorders. Headquartered in Cambridge, MA, their current focus is on non-Hodgkin’s lymphoma, multiple sclerosis (MS), Alzheimer’s, and rheumatoid arthritis. Revenues have grown over 10% annually on average looking at the past 10 years, while earnings have expanded slightly less at ~8% annually on average. The company does not pay a dividend or repurchase a material amount of stock. More recently however, within the past ~4 year period, sales have consistently decreased as multiple flagship products have aged off patent protection windows and the company’s broader portfolio appears mature or in the phase of decline.

4 Intel (INTC) – remains on list

Intel is one of the world’s largest semiconductor companies that designs and manufactures computer CPUs and related technology. Headquartered in Santa Clara, CA the company has recently been the primary beneficiary of the CHIPS and Science Act and is the central component on Washington’s big re-think on semiconductor manufacturing. Spurred by the perceived over-dependence on Taiwan for cutting edge chip manufacturing, the U.S. Federal Government has rolled out capital programs and incentives to entice chip manufactures to make more chips in the continental U.S. Intel’s net revenue (2023A) outside the United states was 74%. Top line and EPS are trending sharply down. The dividend has been cut and share repurchases are expected to be nonexistent. The company is facing gigantic headwinds as their customers have found substitutes for their core CPU technology / architecture. New market entrants have begun successfully designing their own purpose-designed chips. 

COMMENT: From our perspective, Taiwan’s TSMC has likely fundamentally shifted the operating model, with their fab-as-a-service approach. The capital intensity of the industry has put Intel in a severe bind (debt / EBITDA approaching ~5.5x in June 2024). This appears to be a moment in time for Intel when tectonic realignment is required, but the execution risks are immense. With Pat Gelsinger no longer the ship’s captain, we feel the immediate future for the company is likely to be very challenged.

5 MongoDB Inc. (MDB) – remains on list

Intermittently on and off the list throughout 2024, MongoDB first appeared in June (Y240609). The company offers a cloud-based database solution for storing, analyzing, and retrieving documents and data. The New York, NY based MongoDB has ~47,800 customers across 100 countries, was founded in 2007 and went public via IPO in 2017. The company’s revenue and customer count has increased consistently since going public, however profits are still an illusion. The company has not had a single year of profitability (on a GAAP basis) since it’s founding, and is not expected to produce a profit in the near term. There are no company dividends and management is a net issuer of common stock (no buybacks). There is $1.1bn of outstanding debt which all matures within the next few years. Fortunately for the company, the debt is all convertible (with a a coupon well below 1.0%) and they had strong cash position as of Q3 2024 ($2.3bn cash + short-term investments).

6 Merck & Co., Inc (MRNA) – new this week

On this list for the first time, Merck & Co., Inc. is a global drug company providing pharmaceutical (89% of sales incl. prescription medicines, vaccines, biologic therapies), and animal health products (11% of sales). The New Jersey based company’s key drugs include Keytruda (oncology), Gardasil (vaccine), Januvia (diabetes), ProQuad (vaccine), Bridion (hospital acute care), and Lagevrio (virology). Merck has grown revenues ~3.5% on average over the past 10 years. Earnings and cash flow growth have also trended in the low single-digits over the past 10 years. The company pays a ~3.1% dividend but has not repurchased a material amount of stock over the past 5 years. Recently, the company said they would not be shipping their HPV vaccine Gardasil to China until later in 2025, citing weak discretionary spending in China. This contributed to a selloff in the stock and an initial entry onto Screener A.

7 Moderna (MRNA) – remains on list

Intermittently on and off the list throughout 2023 and 2024. Moderna is a biotechnology company that researches and develops drugs. Headquartered in Cambridge, MA the company’s drugs are based on Messenger RNA (mRNA) – a key component studied within the field of molecular biology and used to deliver vaccine solutions for the COVID-19 pandemic. The company’s revenue is purely from their COVID-19 vaccine although they have recently gained FDA approval for a vaccine intended to treat RSV (respiratory syncytial virus). The company went public in December 2018 and has only achieved profitability on a GAAP basis for FY 2021 and 2022. Revenues have collapsed sharply since their 2022 high. Some believe mRNA can be used to create new medicine classes and drugs with the potential to materially improve human lives and open entirely new markets.

COMMENT: Because biotechnology company valuations can vary widely, often spiking and plunging on news related to regulatory approval or perceived drug performance results, we remain very hesitant on the sector broadly.

8 Nike Inc (NKE) – new this week

First appearing on the list in July 2022 (Y220703), Nike is a designer, developer, marketer and global retailer of footwear, apparel and sporting equipment for men, women and kids. Nike also owns the Jordan & Converse brands and sells to retail accounts (wholesale), through Nike-owned stores and website (DTC), and through a mix of independent distributors and licensees. This Dow member has shown impressive top line and bottom line growth over the past 10 years, excluding 2018 and 2020. COVID shook Nike particularly hard and the company has seen their market capitalization fall by ~60% since it’s 2021 high. With a recent strategy realignment to pivot back towards wholesale partners and a new CEO at the helm, Nike is looking to regain shelf space and revive their well-recognized styles. The company pays a consistent dividend and has repurchased a cumulative ~$38bn in common stock, net of SBC, since 2014.

9 ON Semiconductor Corporation (ON) – new this week

First on our screen in August 2024 (Y240802), ON Semiconductor Corp. manufactures power and data management semiconductors and semiconductor components. Similar to Skyworks Solutions, ON is an integrated device manufacturer (IDM) as they own some of the fabs for manufacturing their own chip designs but also partner with foundries. The Phoenix, AZ based On Semiconductor offers automotive and power regulation products and computing items that focus on delivering controllers and transistors for power management. The company’s revenues have grown on average ~10% over the past 10 years, while earnings have annually grown at a materially higher rate (22% on average) over the period. The stock does not pay a dividend, and management has not repurchased any material amount of common stock in the past 5 years.

10 Super Micro Computer Inc (SMCI) – remains on list

First appearing in November 2024 (Y241115), Super Micro designs, manufactures, and sells computer servers. The San Jose, CA headquartered company develops products that are recognized as being highly modular and customizable, which has enabled their server solutions to play a considerable role in the development boom around data centers. The company offers application-optimized servers which meet the more tailored needs of hyperscalers and provide services for cloud computing, AI, 5G and edge computing. Revenues and EPS are forecast to essentially double for FY2024 compared to 2023, after a decade of fairly flat performance. The company does not pay a divided or repurchase stock. In 2018, Super Micro was temporarily delisted from the Nasdaq for failing to file financial statements. By August 2020, the company was charged by the SEC for ‘widespread accounting violations’. As of August 2024, the company has been the target of a short seller who has alleged accounting manipulation, improper revenue recognition, and undisclosed related-party transactions at the company. At the close of 2024, the company had trouble reporting annual results (FYE June 30) and finding an auditor after their previous auditor resigned, citing concerns relating to governance, transparency and completeness of communications.

11 Skyworks Solutions Inc (SWKS) – new this week

First on our screen in April 2022 (Y220410), Skyworks Solutions Inc. offers analog and mixed signal semiconductors. The Woburn, MA based company is an integrated device manufacturer (IDM) as they own some of the fabs for manufacturing their own chip designs but also partner with foundries, such as TSMC. Skyworks Solutions provides power amplifiers and chips for cellular devices, automotive applications, and IoT devices among other products. The company’s revenues have grown on average ~14% over the past 10 years, while earnings have annually grown at a materially higher rate (24% on average) over the period. The stock pays a ~3.2% dividend but management has only repurchased a small amount of common stock in the past 5 years.

12 Symbotic Inc (SYM) – remains on list

First on our screen in August 2024 (Y240802) Symbotic Inc (SYM) is a supply chain optimization company focused on developing, building, and deploying automated distribution centers. The company’s customized warehouse product is designed around a palletized system that handles inbound freight (from trucks) and dynamically stores and retrieves the cases / pallets / items with a proprietary mobile robot. Rick Cohen is current Symbotic CEO (and CEO of C&S Wholesale Grocers) which was originally founded in 2006 to develop advanced technologies with the vision ‘to make the supply chain work better for everyone’. Cohen’s foundation holds 69% of shares outstanding. Since taking Symbotic public via SPAC merger in 2022, Cohen has remained the dominant shareholder with other major backers (Walmart Inc. and SoftBank) further increasing their equity contribution. Symbotic has no debt, over $700mm of cash on the balance sheet and a backlog over $23bn at the end of 2023. Walmart first began partnering with Symbotic in 2017 and by 2021 had signed on to introduce the company’s automated systems to an additional 25 regional distribution centers (out of 45 total). Today, Walmart has plans to integrate Symbotic systems into all of thier distribution centers.

The substantial growth in the past few years for the company has not come without bumps along the way. By mid-2024 management disclosed construction delays and increased implementation costs which had squeezed profit margins, and spurred Cohen and his team to warn that fixing the issues might temporarily slow revenue growth. In November 2024, Symbotic disclosed it had “identified errors in its revenue recognition related to cost overruns on certain deployments that would not be billable, which also affected system revenue recognized in the second, third, and fourth quarters of fiscal year 2024.” Symbotic management restated Q2-Q4 2024 within just a few business days, well within the 15 calendar day limit allowed by the extension filing. System revenue was reduced by $34mm (-2.0% for FY 2024) inline with prior guidance ($30-$40mm).

In January 2025, Symbotic announced a positive development in the ever-growing relationship with Walmart. Walmart has chosen Symbotic to develop, build and deploy an advanced solution leveraging Symbotic’s A.I.-enabled robotics platform to offer Walmart customers greater shopping convenience through accelerated online pickup and delivery options at stores. Walmart is committed to purchasing and deploying systems for 400 stores over a multi-year period.

COMMENT: Symbotic is a very closely held company (less than 7% of total shares trade). Mr. Cohen’s family business is one of the largest privately held companies in the U.S. and is over 100 years old. Since a few short seller reports were circulated in August of 2024, coinciding with Symbotic’s first entry to this list and when the stock was previously in the $40-$45 per share area, there has been substantial shorting of the stock. We view the company’s future, under Rick Cohen’s leadership and with support from Walmart, SoftBank and C&S Wholesale Grocers, as extremely promising. It is challenging to put a hard value on a company growing so quickly, however we think the story gets materially brighter from here. Read the full investment thesis here.

13 Adobe Inc (ADBE) – lost this week

Adobe traded up slightly this week and is off the list as the last 52 week price performance is no longer a decrease of (30.0)% or more. Common shares of ADBE are changing hands in the in the $433 per share area.

First appearing on the list in June 2022 (Y220618), Adobe Inc is a computer software company with tools specializing in the creation, transfer, and printing of electronic documents. Adobe’s software is the industry standard for many categories within the digital media and digital design environment. Headquartered in San Jose, CA the the company’s flagship products include Adobe Illustrator, Photoshop, InDesign and Acrobat. Growth has been impressive, with revenues growing ~16% annually on average over the past 10 years while earnings growth has consistently been above +20% over the same period. The company does not pay a dividend but does consistently repurchase common stock, year after year.

14 Nucor Corporation (NUE) – lost this week

Nucor Corporation traded up slightly this week and is off the list as the last 52 week price performance is no longer a decrease of (30.0)% or more. Common shares of NUE are changing hands in the in the $130 per share area.

First appearing on the list in March 2020 (Y200301), Nucor Corporation is a steel and steel products manufacturer. Headquartered in Charlotte, North Carolina the company’s primary products include hot rolled steel shapes, cold finished bars, joists and deck plates. Company revenues have grown on average ~9% over the past 10 year period, while earnings have grown materially faster at ~30%. The company pays a consistent dividend and repurchases stock. The steel industry is cyclical and stock prices often mirror the cyclicality.

Interpreting results

Broadly, this is an output of U.S. companies with a current market equity value above $10bn with a (30)% decrease in price per share over the last 52 week period. While the circumstances that push a company to meet these criteria are virtually infinite, typically the company is facing heightened profitability risks, competitive challenges, legal or regulatory risks, or other circumstances directly endangering the probability of future profits.

Every so often, we find a company that is facing temporary challenges and / or circumstantial headwinds. These instances warrant timely investigation and review.

Why this screen can be helpful

We find watching this output over time, allows us to quickly identify potential companies or situations to investigate further, augments the weekly Value Line publication well, and keeps us informed on the less-loved corners of the public markets without having to watch misleading charts or spin our wheels on short-term market movements.  We like to observe new entrants and subsequent exits to the list, over time, and share with our trusted readers.