After experiencing a strong rally between November 2013 and June 2015, which caused the PHLX Semiconductor Index to double in value, semiconductor stocks took a harsh beating in the third quarter of 2015 and have been extremely volatile ever since. However, following a very strong run after a short-lived Brexit tumble, the semiconductor space appears to be stronger than ever. The PHLX Semiconductor Index has gained over 130 points since June 27 and analysts believe that the period of extreme volatility might be over and that stocks from the semiconductor space will continue along their current uptrend.
While what technical analysts think about a stock is important to consider, something that is equally important is what sophisticated investors think about it. Keeping that in mind, in this article we’ll take a look at five leading companies in the semiconductor industry and analyze how the billionaire investors in our system have been collectively trading them of late.
We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).
#5. Micron Technology, Inc. (NASDAQ:MU)
– Billionaires with Long Positions (as of March 31): 5
– Aggregate Value of Billionaires’ Holdings (as of March 31): $301.67 Million
Let’s start with Micron Technology, Inc. (NASDAQ:MU), ownership of which fell by three during the first quarter among the billionaire investors that we track, while the aggregate value of their holdings in it shrank by $69.4 million. Micron Technology, Inc. (NASDAQ:MU)’s stock has now pushed to gains of over 5% year-to-date, after being down by as much as 32% at one point. However, despite losing over 57% of its value since last January, the stock still trades at a trailing P/E of 42.90, which is significantly above the semiconductor – memory chips sector’s average trailing P/E of 10.50. Nonetheless, analysts at both Mizuho and Nomura have reiterated ‘Buy’ ratings on Micron’s stock this month, though each firm’s analysts having $16 price targets on it, which suggests minimal near-term upside, as the stock is already trading at nearly $15. John Hurley‘s Cavalry Asset Management initiated a stake in the company during the second quarter; purchasing 715,150 shares and making it the fund’s second-most valuable holding as of June 30.
#4. Analog Devices, Inc. (NASDAQ:ADI)
– Billionaires with Long Positions (as of March 31): 7
– Aggregate Value of Billionaires’ Holdings (as of March 31): $255.76 Million
The number of billionaires in our system long Analog Devices, Inc. (NASDAQ:ADI) inched down by one during the March quarter, while the aggregate value of their holdings in the company fell by $48.1 million. Analog Devices’ stock had been trading in the $55-to-$60 range for several months before finally breaking out in July and currently trades at over $64, up by 16% this year. Analog Devices will report its third quarter of fiscal year 2016 results on Wednesday. For its fiscal second quarter, the company delivered EPS of $0.64 on revenue of $779 million, narrowly topping analysts’ expectations of EPS of $0.62 and revenue of $777.57 million. William Von Mueffling‘s Cantillon Capital Management reduced its stake in Analog Devices, Inc. (NASDAQ:ADI) by 3% to 7.02 million shares during the second quarter.
We’ll check out how billionaires’ top-three semiconductor stocks have been performing lately on the next page.
#3. Intel Corporation (NASDAQ:INTC)
– Billionaires with Long Positions (as of March 31): 8
– Aggregate Value of Billionaires’ Holdings (as of March 31): $1.57 Billion
Moving on, semiconductor behemoth Intel Corporation (NASDAQ:INTC) saw a minor drop in its popularity among billionaire investors during the first quarter, as one fewer billionaire in our system was long the stock by the end of the quarter. Nevertheless, there were also several hedge funds that increased their stake in the company during the period, including SALT Conference host Anthony Scaramucci of Skybridge Capital, which upped its holding by 31% to 295,559 shares. In April, Intel Corporation (NASDAQ:INTC) announced that it would be undergoing restructuring initiatives to accelerate its growth in the Internet of Things (IoT) and data center space. However, this announcement hasn’t had much impact on its stock as it currently trades nearly flat year-to-date. In the last few months, there have been rumors that the company could be considering splitting off its faster-growing businesses (IoT, data center, non-volatile memory) from its PC business, creating two separate companies. However, Intel Corporation has yet to say anything official on the matter.
#2. NXP Semiconductors NV (NASDAQ:NXPI)
– Billionaires with Long Positions (as of March 31): 10
– Aggregate Value of Billionaires’ Holdings (as of March 31): $588.35 Million
Though the number of billionaires in our system long NXP Semiconductors NV (NASDAQ:NXPI) increased by two during the first quarter, the aggregate value of their holdings in it fell by $154.7 million. In the last 12 months, NXP Semiconductors’ stock has lost almost 6% of its value, but it’s currently trading up by 2% in 2016. Most analysts who track the stock feel that the decline in the last year has made it a value buy. Some of them also think that NXP Semiconductors NV is the best stock to own in the semiconductor space, as the company is better diversified than most of its peers and its finances are in much better shape. The company recently sold its Standard Products unit for $2.75 billion to a consortium of Chinese investors, which included JAC Capital and Wise Road Capital. Billionaire David Tepper of Appaloosa Management initiated a large position in NXP Semiconductors NV (NASDAQ:NXPI) during the second quarter, amounting to 1.40 million shares.
#1. Broadcom Ltd (NASDAQ:AVGO)
– Billionaires with Long Positions (as of March 31): 10
– Aggregate Value of Billionaires’ Holdings (as of March 31): $2.77 Billion
The Broadcom-Avago merger was completed in February, following which the stock of the combined entity started trading as Broadcom Ltd (NASDAQ:AVGO). Since the completion of the merger, Broadcom’s stock has appreciated by a hefty 25%. On March 31, ten billionaires in our database were shareholders of Broadcom, down by one quarter-over-quarter. However, the aggregate value of their Broadcom positions swelled by $467 million during the first quarter. On June 2, Broadcom reported its quarterly results for the first time since the merger, which were better than analysts’ expectations. While the Street had estimated Broadcom Ltd (NASDAQ:AVGO) to report EPS of $2.38 on revenue of $3.55 billion, the company delivered EPS of $2.53 and $3.56 billion in revenue. Robert W. Baird initiated coverage of Broadcom on August 12 with an ‘Outperform’ rating and $205 price target, 19% higher than the stock’s current price.