📊 Quick Trade Summary

• 02/02/2021 — Bought 16 shares of Lumentum (LITE) at a total of $1,428.76
• 09/24/2025 — Sold 9 shares at $156.1713 each, receiving $1,405.54

➡️ Net result: My initial capital was nearly recovered. The 7 remaining shares are now effectively “free” — the essence of the 40% Free Stock Strategy.

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Why I Chose Lumentum in 2021

Back in early 2021, the world was buzzing about AI and 5G, but most retail investors were fixated on flashy names like Nvidia or Tesla. Lumentum Holdings (LITE), on the other hand, was a more understated pick. Here’s what drew me in:

1. Positioned in AI’s Plumbing: Optical Networking

• Lumentum builds optical transceivers, lasers, and photonics components. These are essential for moving huge volumes of data between servers in data centers — the backbone of AI training and cloud computing.
• By 2021, companies like Amazon, Microsoft, and Google were already upgrading their infrastructure for AI, and demand for 400G and 800G optical modules was forecast to surge.

2. Growth Metrics (2021 Snapshot)

• Revenue FY2020–2021: ~$1.7B
• Operating margin (non-GAAP): ~19%
• EPS (non-GAAP): $5.12
• Cash on hand: Over $1B, giving them flexibility to invest in R&D and acquisitions.

3. Valuation (2021 context)

• P/E ratio (forward): ~17–18x — not cheap, but lower than many AI-adjacent names.
• P/S ratio: ~2.8 at the time — reasonable compared to “hype” names trading at 10x sales.
• The stock was in the “growth but not absurdly priced” category.

4. Industry Tailwinds

• AI hype cycle: By late 2020, everyone from Elon Musk to Google was pushing AI as the next big wave. The market realized it needed not just GPUs but also the “infrastructure glue.”
• 5G expansion: Telecom upgrades boosted demand for Lumentum’s optical lasers.
• M&A activity: Lumentum had completed the acquisition of Oclaro and was integrating its product line — giving them scale in optical components.

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Why the Stock Took Off (2021 → 2025)

1. Exploding AI Demand

Between 2023 and 2025, the AI boom accelerated. Training frontier models required 100x more compute than just five years earlier, and that meant more bandwidth, more lasers, and more LITE hardware.

• AI data center spending: Grew at >25% CAGR (compound annual growth rate).
• Lumentum became a recognized supplier to hyperscalers, giving them durable demand visibility.

2. Revenue & Growth Data (2025 Snapshot)

• TTM revenue (June 2025): ~$1.65B
• YoY revenue growth (Q2 2025): +55.9%
• Gross margin: 42% (up from ~36% in 2021)
• Free cash flow: Positive and expanding, driven by higher operating leverage.

3. Valuation Expansion

• By mid-2025, P/S ratio climbed to ~6.9 — more than double its 2021 levels.
• Forward P/E ratio: ~31x, reflecting stronger growth expectations.

4. Institutional Recognition

• Citi and other analysts initiated “Buy” ratings in 2025, calling Lumentum a top AI infrastructure play.
• Coverage broadened, and price targets were raised, attracting institutional money.

5. Momentum and Market Sentiment

• Once grouped in with “AI infrastructure stocks” (alongside Nvidia, Marvell, Broadcom), momentum investors piled in.
• A stock that was once seen as “quietly profitable” became “critical infrastructure for AI.”

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Light Irony: A Stock That Went from Boring to Essential

In 2021, Lumentum was the stock you mentioned at a dinner party and got blank stares:

“They make… lasers for fiber optics?”

By 2025, the conversation had flipped:

“Wait, you bought LITE years ago? That’s one of the AI infrastructure darlings now.”

It’s not a meme stock, it’s not flashy — but it became the kind of company that kept the AI hype train on the tracks. A “boring pick” that turned out to be the right kind of boring.

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Key Takeaways

• AI infrastructure matters: It wasn’t just GPUs. Optical networking stocks like Lumentum captured massive demand growth.
• Valuation re-rating: A P/S of ~2.8 turned into ~6.9 as growth + hype intersected.
• 40% Free Stock Strategy worked perfectly: Selling just 9 shares in 2025 covered almost all my initial cost.
• Now, I still hold 7 free shares, positioned for future AI growth — no risk capital left on the table.

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✅ Conclusion: LITE may not have been on everyone’s radar in 2021, but the fundamentals + hype cycle + execution turned it into a big winner for the strategy. Sometimes the stocks powering the cables and lasers are just as important as the flashy AI apps we see in the headlines.