As the overall U.S. equity market continues to struggle to lift off of its January lows, with the Dow Jones Industrial Average moving back below its 20-day moving average on Tuesday, select groups of stocks are actually perking up nicely.
Most have been in defensive areas like telecom and utilities. But today, a group of semiconductor stocks caught my eye in what’s potentially an early sign of cyclical rotation by bargain hunters looking for a turnaround in global economic growth now that major central banks are suddenly making dovish policy noises.
As an industry group, chipmaker stocks have been stagnating near their August lows over the past month and have been flat lining since the summer of 2014. The biggest catalyst these companies face is the rollout of more and more Internet of Things devices, since the inclusion of processing power into connected, everyday items will require an increase in semiconductor demand. That is poised to replace smartphone/tablets as the main bullish impetus behind these names.
And let’s not forget Apple Inc.’s (AAPL) upcoming iPhone 7 debut that will likely kick smartphone sales up a notch once more.
With all that in mind, here are five semiconductor stocks to watch.
Semiconductor Stocks: Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (TSM)
Taiwan Semiconductor (TSM) stock has popped back up and over both its 50- and 200-day moving averages this week thanks to ongoing buying pressure after the company reported better-than-expected earnings on Jan. 14, undercutting some of the iPhone production slowdown fears.
Forward guidance is flat as everyone awaits the debut of the iPhone 7. The company is responsible for about 50% of the production of Apple’s A9 chip.
Semiconductor Stocks: Marvell Technology Group Ltd. (MRVL)
Marvell Technology (MRVL) stock is looking ready to move up and out of a long consolidation range going back to September — a sideways crawl that ended a downtrend that started last February after hitting double-top resistance near $16. The company issued preliminary Q3 numbers back in December featuring non-GAAP earnings of 5 cents per share on revenues of $674 million thanks to better-than-expected demand for solid-state hard drive controllers.
MRVL will report results on Feb. 18 after the close. Analysts are looking for earnings of 10 cents per share on revenues of $662 million.
Semiconductor Stocks: United Microelectronics Corp (ADR) (UMC)
United Microelectronics (UMC) stock has jumped over its 200-day moving average for the first time since May thanks in part to an analyst upgrade by HSBC Securities on Jan. 27. This came in the wake of better-than-expected earnings of 25 cents per share on revenues of $33.85 billion.
According to Digitimes, the company is set to spending around $384 million to expand its 28nm manufacturing capacity.
Semiconductor Stocks: Cirrus Logic, Inc. (CRUS)
Cirrus Logic (CRUS) stock is trading back to its June/December high near $35 after reporting solid quarterly results at the end of January.
Earnings beat by a penny, coming in at 82 cents per share on a 16.5% jump in revenue to $347.9 million.
The company was upgraded by analysts at Oppenheimer on the result and on management confidence in a 15% growth rate in the next fiscal year as the iPhone 7 rolls out.
Semiconductor Stocks: Linear Technology Corporation (LLTC)
Linear Technology (LLTC) shares are testing overhead resistance near the 200-day moving average after reporting better-than-expected earnings of 50 cents per share — a 5-cent beat. Forward guidance was in line, with top-line growth of 2% to 5% expected.
Oppenheimer analysts were positive on the results, noting the high-performance analog producer’s results backed up the view that the industry’s currency inventory drawdown is nearing its end with demand picking up and bookings improving.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.
