Olé
In the 1960s, in the Pyrenees, they'd recruit tourists to fight bulls in arenas. This was a great hustle. It killed two birds with one stone. It kept a steady flow of patsies — er Novilladas — for this iconic cultural ritual and got rid of some annoying tourists, probably.
On a summer trip in 1969 the Pamplones invited my dad and his friend be the targets — er fight the bulls. They didn't stand a chance. The only preparation the Pamplones provided was bottomless champagne — you know, for courage — a red cape and a broad hat.
I guess my dad "won." He avoided the champagne, jumped out of the way of the bull and stayed out of the hospital. His friend indulged the champagne and, when he saw the bull, ran. The bull thanked him for his effort with a gift of two broken ribs.
Bull fights evoke romantic adventure, adrenaline, and white-knuckle action… aided by champagne. Bull markets are the same.
Like a bull fight, you can lose in a bull market. A handful of investors lost recently when the BOJ raised rates and blew up the yen carry trade. Investors would borrow in Yen, where the cost was nearly zero for decades. And invest in higher-yielding places like AI, Cyrpto or the US generally, where rates and returns were higher.
It turned out to be a very clever and sophisticated way to fight the bull market and lose.
How to lose a bull fight.
or
How not to lose a bull market.
Drinking the champaign. Running away. These techniques will lose you the bull fight. The secret to winning the tilt? Don't do that. Same goes for a bull market: don't get too caught up in the highs and don't let the market chase you off from what matters.
What does that mean IRL?
Take Rambus, Inc. It's a semiconductor company. It provides pieces of knitting and designs that go into data center memory systems. Lamplighter's written about it a few times.
The semiconductor index is up more than 22%. That qualifies as "bullish." Rambus' stock dropped from a high this year of $76 to $46. Oops. That could qualify as getting "run over," if that was the end of it.
The biggest knock on Rambus is that Nvidia doesn't use Rambus' connectors. You *might* have heard of Nvidia. It's held the crown as the most valuable company in the world at times this year. It's a great operation and dominates the AI era. So it's regrettable that Rambus doesn't win more of this business. But computers still do other stuff besides run Nvidia-powered AI.
Rambus won't miss out on AI business entirely, but its prospects will ride three broader things:
building more data centers,
data centers adopting DDR5 over DDR4 for memory and
the expansion of companion gear to lower operating costs.
On data centers — yeah, more of those are being built. Most of them still aren't "AI" data centers, just the regular sort that will use Rambus' kit.
New data centers began using DDR5 back in 2021. It was only last year that DDR5 overtook DDR4 as the most widely used technology. Rambus' interface chips get around 50% of that market. They were much less favored in the DDR4 era. As the market continues to shift to DDR5, Rambus will get more of that share and gain faster growth than the market overall.
Finally, there's more for Rambus to do in DDR5 compared to DDR4. They offer temperature sensors, clocks, and power management — boring stuff that can eek out a little more efficiency in a data center. Small changes in efficiency there can deliver huge ROI. These are just hitting the market and ought to juice Rambus' results, maybe a little, maybe more.
A load of bull
None of these things that will drive Rambus forward are the yen carry trade. Or inflation. Or employment. Or any of the other things whipping the stock market around day-to-day.
It's grown its operating income by more than 70% this year. It's product growth looks to pick up despite the Nvidia frenzy. There might be some noise near-term. Semiconductor markets are notoriously finicky. But all the elements are there to carry Rambus' profitably forward.
Disclaimer: None of this is investment advice. It's meant to illustrate ways LCM thinks about investing. Things that LCM decides are good investments for LCM and its clients are based on many criteria, not all of which are covered here. Some or all of LCM's ideas may not be suitable for other investors. LCM does not recommend investing either long or short any position mentioned. LCM may own positions in some of the companies mentioned. Some of its ideas will lose money — investing entails risk. See full disclaimer here.