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Is Lam Research Corporation’s (LRCX) Pent-Up Earnings Power Underestimated by the Market?

Baron Funds, an investment management company, released its “Baron Opportunity Fund” fourth quarter 2023 investor letter. A copy of the same can be downloaded here. In the fourth quarter, the fund rose 15.10% (Institutional Shares), outperformed the Russell 3000 Growth Index, which gained 14.09%, and the S&P 500 Index, which advanced 11.69%. The fund saw a significant increase of almost 50% for the entire year, which was substantially higher than both indexes. It was a strong recovery after a challenging 2022. In addition, please check the fund’s top five holdings to know its best picks in 2023.

Baron Opportunity Fund featured stocks like Lam Research Corporation (NASDAQ:LRCX) in the fourth quarter 2023 investor letter. Headquartered in Fremont, California, Lam Research Corporation (NASDAQ:LRCX) manufactures and services wafer-processing semiconductor manufacturing equipment. On February 27, 2024, Lam Research Corporation (NASDAQ:LRCX) stock closed at $930.73 per share. One-month return of Lam Research Corporation (NASDAQ:LRCX) was 11.36%, and its shares gained 91.50% of their value over the last 52 weeks. Lam Research Corporation (NASDAQ:LRCX) has a market capitalization of $122.021 billion.

Baron Opportunity Fund stated the following regarding Lam Research Corporation (NASDAQ:LRCX) in its fourth quarter 2023 investor letter:

"Lam Research Corporation (NASDAQ:LRCX) is a leading global supplier of wafer fabrication equipment (WFE) and services to the semiconductor industry. Lam’s products tend to focus on etch and deposition process steps and its tools are critical in the production of NAND and DRAM memory chips as well as logic devices. While the share of overall WFE spending looks relatively fragmented across the top four to five players in the industry, each of these leading companies tends to have significant share within smaller slices of the industry, creating a stable and favorable industry structure, with share shifts tending to only happen at times of technology transition in the broader industry. We purchased shares of Lam in the quarter as we believe we are at one of those key transition points in the industry that will disproportionately benefit Lam, with a move to gate-all-around transistors in logic creating an increasing need for complex deposition and etch process stops and the emergence of high-bandwidth memory and advanced packaging requiring increasingly complex high-aspect-ratio (i.e., very deep) etches, where Lam has virtually 100% market share. We also believe the market is underestimating the pent-up earnings power in the company as NAND WFE spending recovers in the coming years from one of its worst downcycles ever in 2023."

A technician operating an automated semiconductor processing machine with laser accuracy.


Lam Research Corporation (NASDAQ:LRCX) is not on our list of 30 Most Popular Stocks Among Hedge Funds. At the end of the fourth quarter, Lam Research Corporation (NASDAQ:LRCX) was held by 67 hedge fund portfolios, down from 74 in the previous quarter, according to our database.

We discussed Lam Research Corporation (NASDAQ:LRCX) in another article and shared the list of best semiconductor stocks to invest in. In addition, please check out our hedge fund investor letters Q4 2023 page for more investor letters from hedge funds and other leading investors.


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Disclosure: None. This article is originally published at Insider Monkey.