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Lam Research's (LRCX) recent earnings exceeded expectations. We're not here to dissect that, though. We're here to review why Lam Research has been outperforming the market and semiconductors broadly, and looks poised to continue doing so.

Lam Research's 53% YTD return has soundly beaten the market's 15% return, and it's also outdone the returns of the iShares Semiconductor ETF (SOXX)  and the SPDR S&P Semiconductor ETF (XSD)  both this year(31% and 41%, respectively) and over the last three years.

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As you might expect, continued outperformance can be attributed to superior management and margins. Lam's return on equity, assets and capital have been exceptional both this year and over the last five years compared to the averages of its peers. This means that the way management has apportioned capital and the returns it has generated on its investments have outpaced the competition, and its share price performance has reflected this effectiveness. Lam's income per employee is also consistent with the "competent management" theme.

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Source: MSN Money

Lam's margins also reflect this trend of management efficacy. Its 47% gross margins and 29% pretax margins beat out industry peers this year (38% and 19%, respectively). Its 5-year averages of 45% gross margins and 21% pretax margins outdo the semi industry's 5-year averages of 36% and 16%, respectively, reinforcing that the above chart and price action are justified and are trends that should continue. And the 2.2% dividend yield, which looks quite safe with only a 22% payout ratio, is the cherry on this well-run cake.

Semiconductors as an industry are rather cyclical. They're often the first component of tech-oriented supply chains and are becoming a leading indicator for services-based economies the same way copper used to be for manufacturing. As an industry, they've been outperforming the market (longer-dated charts resemble the one shared above) and with a growing services sector being the hallmark of advanced/advancing economies, you can look for continued outperformance in semiconductors to be a secular trend.

A winning horse that deserves an overweight position is Lam Research.

Lam is a holding in Jim Cramer'sAction Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells LRCX? Learn more now.

The author is long LRCX.