BROKERS’ NOTES: Buy ASML, sell Anglo American

David Shapiro, chief global equity strategist: Sasfin Wealth

Buy: ASML

ASML is a Dutch company that makes lithography machines that are essential for the production of semiconductors. It sells these to the Taiwan Semiconductor Manufacturing Co (TSMC), which makes the chips for the industry.

Its second-quarter results, which came out last week, were solid and demonstrate that demand going into 2025 is very strong. This is also highlighted by results from TSMC, where sales volumes and net income were way above analyst forecasts and well ahead of what the company did last year.

The market sold ASML down last week because there are serious concerns about the US toughening up on export sales of this advanced equipment to China. But the business the US would target is a very small part of the company’s operations; I don’t think it’s going to affect ASML very much, and the company can easily adapt. I like it at these levels, particularly given where the demand is going for semiconductors, especially with relation to AI.

 Sell: Anglo American

I’m not necessarily negative on commodity companies, but I think the recovery is going to take much more time than the market thinks. While we might be at the bottom of the commodity cycle, the turnaround is going to take longer, and therefore the shares are likely to drift nowhere for some time.

This was highlighted in the production numbers that came out of Anglo American last week. While production is up — other than diamonds, copper was a good number, platinum was higher and even coal rose — pricing is down significantly. So while the company is pulling more out of the ground, it’s selling it for less.

We need those prices to go up to turn these companies around. We need stronger demand coming from the global economy, particularly China, but the Chinese economy is slowing down. Until it gets back to good growth, this market is going to drag.