CSC Idea Post update 1/3/25

We hope you had a wonderful holiday season! Over the break, we operated remotely for the most part, so we apologize for the delay in updating the spreadsheets. The good news is we’re back in action, and everything is now up to date.

While we had hoped for a quieter market today to finalize this update, some recent moves have added urgency to share a few long-term ideas. These ideas are not included in the updated spreadsheets but represent positions we’ve been steadily building.

As a reminder, the last long-term position we discussed here was Boeing (BA) back in October. It had gained about 15% before the recent unfortunate accident news caused a $10 pullback.

Boeing (BA) saw a strong rally into year-end, and we were fortunate to trim some of our position near the highs while maintaining a significant stake. Our thesis remains unchanged, but as expected, the ride was never going to be smooth. Taking profits along the way is a key part of the strategy, allowing you to reinvest when sentiment inevitably shifts against them again.

DeMark sell signals were printing in December, and a big reason we trimmed; also it was quite OB. Remember, we do not manage these actively for members because they are too difficult to offer reasonable stop areas.

UBER is a top idea we’re excited about for long-term accounts. The year-end selloff driven by the Robotaxi headlines was completely overblown. UBER currently trades at just 13x EBITDA and effectively holds a global monopoly on logistics for ride-sharing. With an analyst day coming up in February, we believe this could serve as a catalyst to improve sentiment. While we won’t dive into the full thesis here, this note provides a concise summary of the opportunity.

Technically, as long as it holds the lows, we think the Risk/Reward is asymmetric - our target is ATH’s.

Micron (MU) has faced significant pressure due to weakness in DRAM pricing, but we believe it's poised for a turnaround. The expected inflection in its HBM business, combined with improving DRAM pricing in the second half of the year, should drive a meaningful revaluation higher, especially given its current discounted valuation. Sentiment is overwhelmingly negative, and it's a consensus short—conditions that often lead to sharp moves higher once the tide turns. That said, patience will be key.

Here is a quick snapshot from Bloomberg with the issues:

Here’s a note discussing Micron’s last quarter. Pay close attention to the third paragraph, which highlights the Total Addressable Market (TAM) for HBM (High Bandwidth Memory). While HBM isn’t yet a significant enough portion of Micron’s revenue to materially move the needle, it’s set to grow substantially.

HBM is increasingly critical for AI workloads, especially for high-performance training and inference tasks in machine and deep learning. As adoption accelerates, HBM has the potential to become a major driver for Micron’s growth in the coming years.

Valuation for MU is now at 1.68x P/Book in 2026. Peak book can get to >3x when the cycle is in their favor. That should give you an idea of the upside potential.

P/Book was trading as high as 3.8x back in June.

From a technical perspective, Micron (MU) remains challenging, as it still needs to clear the 61.8% Fibonacci retracement level. However, it’s finding some support just beneath that level, near the same area where it bottomed last year. This will require patience, but with the backdrop of increasing AI spending and Micron’s strong position in the HBM market, the stock should perform well once the DRAM market stabilizes.

Target (TGT) is losing market share to Walmart (WMT), but the valuation gap between the two has become overly stretched, in our view. Great companies like Target have a track record of finding ways to recover. With $10 in EPS power and a reasonable 20x multiple, the stock could justify a $200 valuation—especially when compared to WMT, which is trading at 36x.

The key risk, however, is whether they can address the underlying issues holding them back. On the technical side, the long-term 61.8% Fibonacci retracement level appears to be a solid support zone.

That wraps it up. We maintain a long-term portfolio focused on great companies that had a tough year. These positions are not actively managed but are traded around the edges when they post significant short-term gains. Coming out of 2022, our biggest longs were META and NVDA, and we all saw how those played out. While we don’t expect a repeat performance, we do believe the risk/reward at current prices is skewed to the upside.

As a reminder, these positions will not appear on the sheets.

One final note on recent performance: December was a challenging month. We gave back some gains due to misjudging the likelihood of an end-of-year rally and breaking one of our rules with UBER. Mistakes happen, and the Russell being down 10% in a month amplified losses across most stocks. The key to staying in the game is simple: make more than you lose and minimize drawdowns.

We’re confident we’ll recover last month’s performance, but 2024 may require more active trading compared to last year’s approach of holding positions longer. The market always presents opportunities, and we’re ready to take advantage of them.

Cheers to a robust 2025!

*For more information on TD Buy/Sell Set up, TD Sequential or Combo Countdown, Demark Propulsion, please visit www.Demark.com

CSC Team

Coiled Spring Capital LLC, Founder
http://www.coiledspringcapital.com

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