Buy these four niche semi stocks

May 24, 2017 01:37 PM

Semiconductors as a sector are as good as gold; perhaps better than gold. These tech stocks should be your focus if you want to invest in long-term growth potential. 

Of 696 publicly traded stocks in Zacks’ Computers and Technology sector, 84 are semi firms. Of those, 83 of 84 are in the top 37% of Zacks Industry Ranks, and 37 listed semi stocks of 84 are in the top 17%. 

Some investors may be apprehensive regarding the sector due to its complexity and abundance of niche technical terms. They do not understand semi technology and terms used in very specific niches, such as circuit foundry, programmable logic and W\wafer components. These confuse people who do not have a technical background in semiconductors.

However, there are four “stray” semiconductor stocks you should consider. These stocks are stray in the sense of representing a single semiconductor company located inside a single semiconductor industry. Such attractive stocks get overlooked, even in Zacks’ rank system.  

Circuit foundry: Taiwan semi (TSM)

Economic forces have led to the existence of many companies that only design devices — known as fabless semiconductor companies — as well as merchant foundries that only manufacture devices under contract by other companies, without designing them. This company is the latter.

Memory Chi: Micron (MU)

Semiconductor memory is an electronic data storage device — often used as computer memory — implemented on a semiconductor-based integrated circuit. A byte of data can be written to or read from semiconductor memory within a few nanoseconds, while access time for rotating storage such as hard disks is in the range of milliseconds. This company is the biggest.

Programmable logic: Xilinx (XLNX)

A programmable logic device (PLD) is an electronic component used to build reconfigurable digital circuits. Unlike a logic gate, which has a fixed function, a PLD has an undefined function at the time of manufacture. Before the PLD can be used in a circuit it must be
programmed — that is, reconfigured.

Wafer Components: Coherent (COHR)

Wafer fabrication is a complex clean room procedure of repeated sequential processes to produce complete electrical or photonic circuits. Examples include production of radio frequency (RF) amplifiers, LEDs, optical computer components and central processing units CPUs for computers. Wafer fabrication is used to build components with the necessary electrical structures.


About the Author

John Blank, Zacks Investment Research