Why revisit Xilinx?
We had invested in Xilinx in the summer of 2018 and had exited by February 2019 – with a handsome payoff of a >50% realized return. Back then we had exited to raise cash for other investment ideas. We got slightly lucky because the company started facing 2 headwinds subsequently in the fall of 2019. First, the Trump Trade War related Huawei restrictions impacted Xilinx’s revenue (Huawei made up about 10% of their sales). Second, the same 5G rollouts that had accelerated in early 2019 started slowing down more than expected in late 2019. And then, of course, the pandemic captured the world. After the fast and furious market crash of March 2020, we started becoming interested in Xilinx when it approached $70 per share.
Way back in 2018, our valuation of Xilinx was close to $90. We suspected that we won’t change our valuation of Xilinx too much, but we still needed to dig in and make sure our analysis wasn’t stale. Pending and analysis, we thought we’d dig in and pick up some stock after the crash. But since then the market rallied like a rocket. We are still interested in Xilinx, but at what price?