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Chipmakers, chip designers and chip equipment makers have been showing strength in the current stock market . As of Friday’s IBD, the semiconductor manufacturing group was No. 27 among 197 industry groups. Three weeks ago the group also was No. 27 and six weeks ago No. 28. So chipmaker stocks are keeping their grip. The fabless chip designer group is No. 29. Three and six weeks ago, the group’s rank was No. 26 and No. 44 respectively. These rankings also show stamina. The semiconductor equipment group is No. 16 and rated 14th and 23rd three and six weeks ago — again solidly positioned. What’s the deal with chip stocks? Chips aren’t getting a great deal of attention right now because they have had a hard act to follow. In 2014, global sales jumped 9.9% vs. 2013, according to the Semiconductor Industry Association. At $335.8 billion, it was the highest sales ever. However, 2015 sales eased 0.2%. And in Q4, sales were 5.2% below the year-earlier pace. In a press release Feb. 1, Semiconductor Industry Association President and CEO John Neuffer said, “Factors that limited more robust sales in 2015 include softening demand, the strength of the dollar, and normal market trends and cyclicality. In spite of these challenges, modest market growth is projected for 2016.” Data for January is expected to be released in early March. One factor that could help the chip sector long term is legislation that Congress passed recently. The legislation permanently extends the research and development tax credit. Neuffer called the legislation “a huge win” for the chip sector. The permanent aspect is regarded as important because it allows the industry to plan ahead. Which stocks in the three chip groups are worth attention now? Macom Technology Solutions ( MTSI ) is the leader in chipmaker group. The small-cap stock has a Composite Rating of 98, the highest rating in the group. The Composite Rating combines all five IBD ratings into a single number. A rating of 98 puts the stock in the top 2 percentile. Earnings in fiscal 2016, ending in September, are expected to leap 52%. Columbia Acorn A Fund ( LACAX ) opened a new position in Q4. Chartwise, the stock is working on a pattern that looks like a double-bottom on the daily chart. Small cap play MaxLinear ( MXL ) has the best ratings in the chip designer group. The Composite Rating is 99. Earnings are expected to grow 26% this year. MaxLinear’s chart also looks like a double-bottom base on the daily chart. It is just under a 16.29 entry. Big cap KLA Tencor ( KLAC ) has the best rating in the chip equipment maker group among the stocks with good liquidity. Its Composite Rating is 98. Earnings are expected to grow 28% in fiscal 2016 ending in June. KLA is working on a shallow double bottom within a larger consolidation. Scalper1 News
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