Trade of the Day: RF Micro Devices (RFMD)

Advertisement

Right now I sense that investors are being deceived by a lot of negative news overseas and in the U.S. economy. The Ukraine mess, for instance, is interesting but really should not affect U.S. companies’ value.

Don’t forget that the Bosnian war raged throughout much of the mid-1990s, with major European cities in the Balkans being strafed by fighter aircraft, and horrible genocide reported every day, and the U.S. markets continued merrily on their way. And as for the Middle East mess, well, let’s not forget we were involved in a major war in Iraq from 2003 to 2007 while the U.S. and global markets ripped higher without pausing for breath.

As for the anemic U.S. economy and the soft job market, so what? Stocks don’t need the economy to be raging at 4%-plus economic growth to be successful. Growth was less than that during the 1990s — and besides, the slower the recovery is, the longer it is likely to last. You don’t want people to be excited about a super-strong economy. You want to be buying assets when the environment appears to be mushy, or prices will storm too high and inflation will cause the Federal Reserve to choke off growth with higher interest rates.

In short, my models still suggest that this is a good time to be an opportunistic investor and trader. We’ve been doing well lately with technology stocks, and I will continue to recommend them on the long side until there is a material change of mood or fundamentals.

The Apple (AAPL) presentation of new products on Sept. 9 went pretty much as expected, with the company rolling out iPhones that were anything but innovative and the media going crazy for them anyway. One smart-aleck created a graphic that showed how the new iPhone 6 essentially only brings the company up to where the Google Nexus, running Android, was in 2012. Click here to see it.

It’s really true — there is nothing new in what Apple presented, which is really sad in a way, but also continues to provide lots of opportunity for competitors. I like companies in the mobile-communications space, as it is one of the most important new technology developments of our time. Take a look at the chart below comparing makers of a key component, semiconductors, with the larger tech sector as well as the broad market.

Along those lines, today I’m recommending a trade in RF Micro Devices (RFMD). It has been one of the stronger tech stocks of the year, rising to $12 now from the $4.50 area where it perched in January, as you can see in the chart below, which shows daily bars. The company is one of the top manufacturers of the radio frequency (RF) components that are an essential part of mobile devices.

Earlier this year, it announced a “merger of equals” with former rival Triquint Semiconductors (TQNT), which is a leader in the space in its own right. The combined entity will have one of the most diverse and advanced chip portfolios in the world, selling power amplifiers, power management ICs, antenna controllers, switch controllers and filters to the likes of Apple, Samsung and Microsoft (MSFT). Beyond the pure mobile-device sphere, the combined company will be a leader in the supply of sensors to the nascent Internet of Things revolution — which is a bit creepy in its pervasiveness, but unstoppable.

RFMD shares are just completing a pullback to their 21-day average and tend to do well in September and October. The stock is already up 135% for the year to date, but it’s still cheap, and as I mentioned its products are right in the sweet spot for mobile communications. I see it continuing to move up, and the estimates are moving higher for the quarter and next year.

Buy RFMD at current levels for target $13.15. Set a protective stop at $11.30, good after 11:00 a.m. ET only.

Jon Markman operates the investment firm Markman Capital Insights. He also offers a daily trading advisory service, Trader’s Advantage, and CounterPoint Options, a service that helps individual traders make steady, consistent profits with volatility-related instruments.


Article printed from InvestorPlace Media, https://investorplace.com/2014/09/trade-day-rf-micro-devices-rfmd-mobile/.

©2024 InvestorPlace Media, LLC