Stock Stories brings you closer to the heart of our investment strategy. In these short, videos, Co-lead portfolio manager Julian Bishop discusses some of Brunner’s portfolio holdings and how they contribute to our overall strategic objectives of delivering growing dividends and capital growth for our shareholders by investing in a diversified set of high-quality companies from around the world.
In this short episode of ‘Stock Stories’, Julian discusses an investment decision that was made and is illustrative of the Trust’s strategy: ASML.
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My name is Julian Bishop and I'm co-lead portfolio manager of The Brunner Investment Trust. It's important to remember that all investments come with risk. We aim to provide an all-weather portfolio that seeks to create wealth across market cycles. And to do this, we seek a balance between investment attributes such as quality, value and growth. Predominantly, though, we invest in high quality companies at a fair price and hold them for a long time.
We look all over the world for the best businesses for our portfolio. One place our search has led us to the Netherlands and the small town of Veldhoven, there, one company employs more than 15,000 people, or one third of the town's population. The company's, called ASML, which stands for Advanced Semiconductor Materials Lithography.
ASML has almost certainly been instrumental in creating the electronic device you're using right now. The company makes lithography machines, which use light to expose tiny patterns on silicon wafers. This is a fundamental step in the production of microchips. The foundations of our digital world.
The latest chip in your smartphone can have as many as 20 billion transistors, on and off switches essentially, in a space little more than 1 centimetre squared. As technology advances and the transistors shrink in size to dimensions literally a few atoms across, the process of creating them becomes almost unfathomably complex.
ASML uses light to expose the pattern of the chip on the silicon wafer. Hence the term lithography, which means stone writing. Because of the nanometer scale of the pattern, is far smaller than the wavelength of ordinary light. ASML uses a new form of light with a far shorter wavelength, called extreme ultraviolet, or EUV. Generating EUV light alone is an exercise of extraordinary complexity. The process involves shooting a tiny ball of tin, a 30 millionth of a meter wide through a vacuum at 200 miles an hour, and then striking it twice with a laser, the first time to pulse it up, the second to blast it into a plasma with a temperature many times hotter than the surface of the sun. This process is repeated 50,000 times per second.
This light is then projected onto the silicon via a series of mirrors which are so smooth that if they were expanded to the size of Germany, the largest defect or mountain would be just 1 millimeter tall.
ASML’s latest machine has over 100,000 parts, costs €350 million euros and weighs as much as two Airbus A320s. The semiconductor industry has come to rely on EUV lithography machines. And ASML is the only company on Earth which can make them.
There are no guarantees with any investments. And this stock story should not be seen as a recommendation. Instead, it's illustrative of our philosophy at the Brunner Investment Trust.
Disclaimers: Securities mentioned in this document are for illustrative purposes only and do not constitute a recommendation or solicitation to buy or sell any particular security. These securities will not necessarily be comprised in the portfolio by the time this document is disclosed or at any other subsequent date. Past performance does not predict future returns.
ASML Stock Story: Inside the BUT Portfolio
It is important to recognise that all investments come with risk. Brunner aims to create an all-weather portfolio that generates wealth across market cycles. To do this, the Trust strives to balance investment attributes such as quality, value and growth. In general, it aims to invest in high-quality companies at attractive prices and hold them for the long term.
Why Brunner Investment Trust invested in ASML
Brunner’s managers scour the globe for opportunities, including in the Netherlands, where the Dutch company Advanced Semiconductor Materials Lithography (ASML) highlights the type of businesses the Trust favours. ASML is instrumental in creating many of the electronic devices now ubiquitous across the globe. Indeed, the company supplies machines that are fundamental to the creation of the microchips that provide the foundations of the digital world.
The latest mobile-phone chips can contain up to 20 billion transistors (on-and-off switches) in the space of 1 square centimetre. As technology advances and transistors continue to shrink in size, the process of creating them becomes ever more complex. As an example, ASML now uses light to transpose the pattern of the chip onto a silicon wafer – hence the term lithography, which means ‘stone writing’.
ASML’s cutting-edge technology
Due to the incredibly small size of the pattern, ASML uses a new form of light with a far shorter wavelength than ordinary light – called extreme ultraviolet (EUV). Generating EUV is an extraordinarily complex task. Once created, the light is projected onto the silicon by a series of mirrors, which are so smooth that if they were expanded to the size of Germany, the largest defect, or ‘mountain’, would be just 1 millimetre tall.
ASML’s latest machine has over 100,000 parts, costs around 350 million euros and weighs the equivalent of two Airbus A320 airliners. The semiconductor industry has come to rely on EUV lithography machines, and ASML is the only company on the planet that can make them.
The benefits of diversification
This stock story is not a recommendation to buy ASML, but simply explains why the company has a place in the portfolio of The Brunner Investment Trust. There are always risks associated with investing in ASML or any individual stock, including the emergence of disruptive technology and a downturn in a particular sector or the stock market more generally. Any of these could affect the ASML stock price. Adverse geopolitical, regulatory or macroeconomic developments can also affect the share price of a business such as ASML. Ultimately, nobody can predict the future, or how the ASML stock price or any other share price will perform over time.
So, it might be wise to invest in a professionally-managed investment vehicle such as The Brunner Investment Trust. It holds a number of companies such as ASML in the investment portfolio and this diversification should help if the ASML share price comes under pressure.
Article disclaimers
Securities mentioned in this document are for illustrative purposes only and do not constitute a recommendation or solicitation to buy or sell any particular security. These securities will not necessarily be comprised in the portfolio by the time this document is disclosed or at any other subsequent date.
The statements contained herein may include statements of future expectations and other forward-looking statements that are based on management's current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. We assume no obligation to update any forward-looking statement.