$ENTG's annual report is sort of a cool place to go to learn a bit about semiconductor manufacturing. investor.entegris.com/static-files/7…
Shit (I know it's basic semi bros, don't hate me) I didn't know!

Gonna use planarization more in conversation.
Staying on the right side of a potential split of the US/China semi manufacturing business/ecosystem seems important.
$ENTG getting some of that sweet EUV/300mm action everyone keeps talking about.
$ENTG is ESG with solar.

Also, interesting optionality if any of these get big.
$ENTG has no competitors (that do everything they do).

Worth noting the listed ones are usually subs of larger, less focused competitors, which tends to be good news.
$DD has an electronics materials business which is the closest pubco comp I can think of for $ENTG, but it's not that great of a comp. 28-30% EBITDA margins vs. basically the same at $ENTG.
$DD is earning that on $12bn of assets vs. $2.8bn for $ENTG.

Below is a rough estimate of segment FCF and FCF ROA. As you can see, the gem is the MC segment. ROIC dipped due to acquisitions.
$ENTG I smell operating leverage. Generally that is a good thing if you have big secular growth drivers.
$ENTG bigly AsiaPAC exposure, but not surprise as their largest customers are TSMC and Samsung. I'd imagine NVIDIA is a customer too (entegris.com/shop/en/USD/pr…)
This is the main reason I'm interested in $ENTG. ~70% of the business is units of production driven NOT capital spending driven, which is really what we're after here.
3 drivers of growth: GDP x2 + increased performance + reliability of semis = more demand per chip for $ENTG products. If GDP is 3% = 6% + 2.5% = 8.5% topline + M&A.
Growth is also likely to be margin accretive: If you assume mkt grows 6%, and take segment guidance and midrange margins, operating margins expand 5bps/year on their own let alone any utilization/mix benefits driving those margins from low to high of the guided range.
$ENTG Putting things together, the topline should grow 8-9%, and there is ~50bps of margin expansion if you assume exit operating margins in 5 years are at the top end of the guide (which is likely I think), so your operating income is growing 8.5-9.5%/year ex-M&A.
$ENTG With a little financial leverage (current net debt/EBITDA of 1.4x), that can probably translate into 10-11% net income growth ex M&A and assuming no buybacks.

So to get 15% returns on this I'd need a 4-5% going in FCF yield. FCF is ~$240/year 2020E = ~$45/share at 4%.
The question one really has to wrestle that this is I think a lower risk/victor agnostic way to play semis, so is say 12% acceptable? With low rates is that acceptable? IS there a high likelihood $ENTG does M&A, yes, and historically they've been good at it.
So if you think with M&A this can grow 14%/year, in 2025 at a 5% FCF yield it's worth the same as today, so valuation expansion really is the big risk. So for now I think I'll pass and wait for an entry in the 50's.
Where could I be wrong? I underestimate operating leverage is probably the biggest area. Haven't done enough DD to figure that out yet. They could also be under-earning this year, consensus FCF is close to $350 million in 2021, in which case this trades at a shade under 4% yield.
If you wanted a 4.5% 2021E FCF yield, as an indication of a better run-rate for the business, you'd need ~$56 on the stock, hence my 50's comment. Somewhere in there and this starts to get more interesting I think.

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More from @PythiaR

16 Sep
$NVO GLP-1's are a (the) big growth area, my understanding is they're like a combo insulin + weight regulator, and also more expensive/higher margin, but fill a big need for diabetics. Novo's consolidated topline masks the growth in this area.
Some of this growth is COVID stocking, however $NVO has ~50% market share in this very valuable area within the diabetes market.
They've outlined 2019/2020 as investment years, with numerous launches, stepped up R&D spending and investing behind sales.

As launches get out there, you start seeing some leverage on SG&A, so that is a positive for earnings.
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actually buys back more of its stock when the share price is low. Image
Not a semi expert, but presumably things can't keep shrinking forever. Image
I *might* see a competitive advantage/barrier to entry here: "there's absolutely no tolerance for any variation."

Brings to mind what someone said about modern semi-manufacturing being indistinguishable from magic. cc Image
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Now that I'm getting more involved in running our wealth management business, I agree wholeheartedly with Buffett's take that being a business owner made him a better investor and vice versa.

It should be mandatory training for PM's to try running a business.
Having to wrestle with things like initial ROIC for a new business line vs. what ROIC could be if we executed, leveraged high fixed costs w/ very high incremental margins, determining TAM, growth prospects (ie is this even worth our time), our competitive advantage there etc.
Having an understanding of what makes a great company helps me filter opportunities in our own business much more effectively. But having to help run a business gives me a greater sense of the struggles but also opportunities facing the businesses we invest in.
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Another great quote.
Pretty cut and dry evidence of $WCN effectiveness on culture.
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1/n When I graduated high school, I went into Political Science and Economics instead of business to learn to study systems and people.

Initially, I started to think that was a mistake. In my 1st summer, I took Damodaran's MBA valuation course. I taught myself accounting.
2/n I was always worried about being not technically up to snuff with the b-school kids. So outside of school, I taught myself excel. I drilled investment banking prep. I read every finance book I could find. I ended up teaching business school kids finance.
3/n I focused my schoolwork on the intersection of economics and politics. I wrote a paper on derivatives regulation. The last paper I wrote for a seminar was using $FMCC and $FNMA as examples of how a judiciary was needed to rectify niche cases of minority rights infringement
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Makeup has been with humanity for ~8,000 years. Alcohol was first drank during funeral celebrations over 10,000 years ago. Jewelry has been with us 30,000 years.

Betting on people needing to display status for mates, socializing, travelling, and getting intoxicated are solid.
The hard part is getting the company right. A local watering hole that is essential to a community (e.g Sean's pub) may be a better bet than a large restaurant chain.

A large global enterprise like Twinnings (300 years old) may do just as well as a local tea shop.
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