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By Pat Dorsey, CFA | 03-24-2010 03:20 PM

Two Wide-Moat Ways to Play a Coming Memory Shortage

With flash memory demand heating up (and little new supply on deck), these strong players could pop, say Morningstar's Pat Dorsey and Andy Ng.

Pat Dorsey: Hi, I'm Pat Dorsey, director of equity research at Morningstar. Generally speaking, I am not a big fan of trying to make money on consumer trades. Consumer electronics, a certain gadget becomes popular, people become excited about it, want to buy the stock. Eh...Typically it's a tough way to make money, because product cycles are pretty short, margins are pretty thin.

However, there's an interesting trend that's been happening recently regarding some of the consumer electronics, like smart phones, that you all know and love, that may offer a pretty interesting opportunity to make some money in some pretty attractively positioned wide moat firms. With me is our senior analyst Andy Ng, who covers the chip space for us, to talk about this trend. Thanks for joining me, Andy.

Andy Ng: Hi.

Dorsey: So, big picture, flash memory, which is the kind of stuff you have in those little USB things you stick in your computer, has really been increasing in terms of demand lately. Why is that?

Ng: Flash memory isn't just in the USBs. You can also find them in your smart phones, even some netbooks, and your MP3 players, and so on. And, on the demand side, the growth in smart phones, the proliferation of smart phones, has really driven demand for flash memory in the last year.

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