Stocks I'm DCA'ing Into Now (Part 1)
ASML OXY DKNG
Hi fellow investors 👋
The markets are valued quite high now, especially amongst the more common names like Palantir and Tesla which are trading at some ridiculous valuations. I am owners of both PLTR and TSLA and have done very well from them, but there’s no time to wait around and enjoy the returns.
These are 3 stocks that I have started to slowly DCA into. I am being a bit more hesitant with the market right now as I think there is likely we get some move downwards. That’s why I’m DCA’ing on a bi-weekly or monthly basis into these👇
ASML Holding (ASML)
Introduction
ASML Holdings, headquarters in Netherlands, has a monopoly in advanced lithography equipment which is essential for semiconductor manufacturing. Chipmakers want to make the smallest, fastest, and most energy-efficient chips. This is all made possible by the tech that ASML possess in producing photolithography systems.
ASML clients include TSCM, Intel, and Samsung.
Numbers
Revenue Growth: 11.90%
NTM EV/Sales: 7.7x
EBITDA Margin: 35.85%
Commentary
I started DCA’ing into ASML post the big recent drop and I’m already up post the Investor Day just a few days ago where management stated they plan to grow at 11% CAGR through to 2030. This would mean they would generated $55B in revenue at a gross margin of 58%.
$55B revenue at 7.7x (current EV/Sales multiple) would lead to a 170% return through to 2030 but I see more return than this with higher margins leading to a much higher EBITDA margin.
ASML have a monopoly in EUV (Extreme Ultraviolet) lithography which is a big advancement compared to more traditional DUV (Deep Ultraviolet) systems. EUV systems are 15 times shorter than DUV systems which allows for much higher density of circuit elements.
This technology allows ASML to hold one of the biggest moats in the semiconductor industry because the barriers to entry for nanometer-precision equipment are so high. For context, NVDA uses Blackwell chips which are produced by TSM, one of ASML’s biggest customers. As long as semiconductor companies continue to have a strong demand, the need for ASML’s technology will only expand.
Anything under $700 I think is an incredible opportunity for investors. This isn’t a company that I think will give you 5-10x returns over the next 3-5 years. But I think it is one of the safest bets out there to give returns upwards of 150% over the next 5 years.
That’ll beat the market.
Occidental Petroleum (OXY)
Introduction
OXY, headquartered in Houston, is one of the largest international energy companies specializing in oil and gas exploration, production, and chemical manufacturing. It operates globally and are now investing heavily into carbon capture and storage technologies aiming to support the global energy transition.
Numbers
Revenue Growth: 1.72%
NTM EV/Sales: 2.9x
EBITDA Margin: 49.61%
Commentary
Oil prices have been pretty low this year. Currently WTI crude sits below $70 so of course this is going to have an impact on OXY’s business operations too. I’m no oil and gas expert, and I’ll never claim to be but I am certain that the oil markets will pick up again, and with that OXY will too.
Despite the volatility in commodity prices, OXY managed to deliver the higher operating cash flow ever at $1.5B in the quarter. If that doesn’t show resilience and huge potential when commodity prices do increase then I’m not sure what will. So fundamentally, I think OXY is very strong and I don’t have too many concerns here.
The actual oil markets are what is controlling the OXY sentiment here though. Here’s what I think is happening here:
Currently, odds of a 2025 recession are up to around 70%. When you combine this pessimism with a very weak oil demand in China (OPEC cut Chinese oil demand from 580,000 to 450,000 barrels per day), you’ve got a market that lacks strength.
I don’t think the oil markets will turn around in the next few months which is why I think now is a perfect time to DCA to capitalize on OXY which is also dropping.
In case you didn’t know, Warren Buffett bought OXY in the $60s. OXY is currently trading at $49.
DraftKings (DKNG)
Introduction
DKNG is headquartered in Massachusetts. They’re the leading provider of digital sports entertainment, gaming, and gambling. The company operates daily fantasy sports contests, online betting, and iGaming platforms.
Numbers
Revenue Growth: 38.7%
NTM EV/Sales: 3.4x
EBITDA Margin: -16.6%
Commentary
I’ve spoke about DKNG a good amount here and on X and I’ve consistently said they’re one of the leading players in an industry that is estimated to grow to $30 billion by 2030.
I don’ think this will change because simply the popularity of online gambling is increasing and it’s becoming more and more widespread across different states as legislations ease (North Carolina in 2024, and now Missouri just more recently). That’s the long term bull case very simply put.
However, I’m going to talk mostly here about why I am slightly apprehensive and why DKNG will never be a huge position for me. Unfortunately, a lot of DKNG’s success is somewhat out of their hands. If a particular US state doesn’t like DKNG’s operations they can easily decide not to renew their license, or alternatively increase the number of licenses to make competition in the market a lot more intense. There is no way to get around the difficulties that different US states may put on DKNG.
The tailwinds for the sports gambling market are strong, but so are the headwinds. I think the winners in the market will be those who manage these headwinds the best. My personal opinion is that DKNG is one of the most operationally efficient in the market, and that’s why I have a small position. The risk to reward is hopefully strong and in the end that’s what investing comes down to.
That’s it for the day
I hope you loved this article. Please do leave some feedback for me.
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Nice, I've been in $DKNG around a year, should be a good bet going forward, happy to buy upto $45, Also bought into $ASML.NV recently and have been building positions have €637 average cost, and am happy to buy up to €700, best of luck...
Pardon my ignorance, but I have no idea what DCA ing Is.