Appalaches Capital, an investment management firm, released its first quarter 2025 investor letter. A copy of the letter can be downloaded here. Appalaches Core LO ended the quarter with a loss of 0.5% after all fees and expenses compared to the S&P 500’s decline of 4.3%, the equal-weighted S&P 500’s loss of 0.6%, and the SOFR Index return of 1.1% in the 1st quarter. In addition, please check the fund’s top five holdings to know its best picks in 2025.
In its first-quarter 2025 investor letter, Appalaches Capital highlighted stocks such as Lam Research Corporation (NASDAQ:LRCX). Lam Research Corporation (NASDAQ:LRCX) designs, manufactures, markets, refurbishes, and services semiconductor processing equipment. The one-month return of Lam Research Corporation (NASDAQ:LRCX) was 11.46%, and its shares lost 13.91% of their value over the last 52 weeks. On June 3, 2025, Lam Research Corporation (NASDAQ:LRCX) stock closed at $83.66 per share with a market capitalization of $107.01 billion.
Appalaches Capital stated the following regarding Lam Research Corporation (NASDAQ:LRCX) in its Q1 2025 investor letter:
“We also initiated positions in ASML Holding N.V. (ASML) and Lam Research Corporation (NASDAQ:LRCX), companies that manufacture capital equipment for the semiconductor industry. You may be wondering if I have been “red-pilled” by A.I. after being so iconoclastic to the trend just a year ago. Not quite. Despite all of the attention being given to Artificial Intelligence, the rest of the semiconductor industry, like memory and trailing-edge nodes, has been recovering out of a cyclical trough. Semiconductor foundries have additionally announced large increases to their capital expenditure budgets, which flow directly into the backlogs of companies like ASML and Lam. After a long period of consolidation, both operate in a highly consolidated industry structure with little to no competition. Both companies have smart and disciplined capital allocation, returning most of their cash flows to shareholders through large repurchase programs. While not thought of as traditional value stocks (despite having healthy free cash flow yields), I have a very favorable view of the industry broadly.
In order to understand what these companies do, and why it is so difficult to compete with them, a quick look into a semiconductor fabrication facility (a “fab”) is necessary.
Fabs vary in size, but most modern facilities will be at least 250,000 square feet in production space, or around 6 acres. According to Intel, their fabs have 1,200 different tools laid out across the facility, each having a size that ranges from that of a small car to a school bus. These tools print, deposit, etch, clean, and inspect features that are only nanometers in size on a small disk of crystalline silicon, called a wafer. These silicon wafers travel from tool to tool in a sterilized container on an interconnected highway system of rails, intentionally and algorithmically laid out for maximum efficiency. A wafer will be transferred from machine-to-machine thousands of times over a period of three to four months before being completed; any interruption in the process significantly reduces the throughput of the fab and risks contaminating the highly delicate chip-structure with dust and other microscopic debris. The fabs themselves take three to five years to build and are designed around the dimensions of the tools being purchased. All of this is to say that once a tool is in the specifications of the facility, there is no replacing it with a competitor…” (Click here to read the full text)
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. As per our database, 91 hedge fund portfolios held Lam Research Corporation (NASDAQ:LRCX) at the end of the first quarter, which was 84 in the previous quarter. In the March quarter, Lam Research Corporation (NASDAQ:LRCX) reported revenue of $4.72 billion, representing an increase of 24.4% from last year’s comparable quarter. While we acknowledge the potential of Lam Research Corporation (NASDAQ:LRCX) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the undervalued AI stock set for massive gains.
In another article, we covered Lam Research Corporation (NASDAQ:LRCX) and shared the list of stocks everyone’s talking about as Trump blinks in trade war. In addition, please check out our hedge fund investor letters Q1 2025 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.
