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What are we looking for?

U.S. semiconductor stocks showing strong price momentum.

Over the past month, momentum traders have piled into semiconductor stocks driving the Philadelphia Semiconductor Index higher by almost 12 per cent. The index recently surpassed its record high set back in 2000 during the tech bubble. Strong economic data as well an abundance of merger and acquisition activity in the industry have caused traders to bid up the prices of a variety of semiconductor names. Semiconductors are by far the best performing industry in the U.S. market over the past month.

The screen

We will be using Recognia Strategy Builder to search for U.S. semiconductor stocks that offer the prospect of strong earnings along with recent stock price momentum.

We begin by setting a minimum market cap threshold of US$10-billion. This will focus our search on large-cap U.S. semiconductor stocks, which typically have higher quality revenue streams than their smaller counterparts and also have a track record of performance. We will also limit our search to stocks with analyst forecasted earnings per share (EPS) growth rates this year of 12 per cent or more.

To ensure we focus on firms with the best price momentum over the past month, we will constrain our search to companies with a four-week price performance of 5 per cent or better and currently trading within 10 per cent of their 52-week high.

More about Recognia

Recognia is a global leader in automated quantitative analysis and engagement solutions for retail online brokers and institutions. Recognia's product suite provides actionable trading ideas based on technical and fundamental research covering stocks, ETFs, indexes, forex, options and commodities.

What did we find?

Topping our list is Micron Technology Inc., one of the world's largest providers of computer memory chips. Micron currently has the best four-week price performance on our list as well as the highest estimated EPS growth rate. Micron stock is up 37.6 per cent in the past month and up 42 per cent in the past quarter.

Broadcom Corp. has been in the news of late. In November, 2017, Broadcom announced a hostile bid to acquire rival Qualcomm for about US$117-billion. Earlier this week, the deal was blocked by U.S. President Donald Trump citing national security concerns. In spite of this news, Broadcom is up 5.2 per cent on the month and up 16 per cent from its February lows.

Intel Corp. is the largest company on our list with a market capitalization in excess of US$240-billion. Intel stock is up more than 14 per cent in the past month and now trades less than 4 per cent off its 52-week high set on March 13. On Jan. 25, Intel announced fourth-quarter earnings, which beat analyst expectations for both the top and bottom line. Intel is the only semiconductor stock in the Dow Jones Industrial Average.

Historical Performance

Recognia Strategy Builder provides a back-testing capability to evaluate how well an investing strategy would have worked in the past. Using a five-year historical period with quarterly rebalancing, the screen described had a 32.5-per-cent annualized return compared with 12.3 per cent for the S&P 500.

The investment ideas presented here are for information only. They do not constitute advice or a recommendation by Recognia Inc. in respect of the investment in financial instruments. Investors should conduct further research before investing.

Peter Ashton is vice-president of retail and self-directed investing at Recognia Inc.

U.S. semiconductors with price momentum

RankCompanyTickerMarket Cap. (US$Bil)Recent Price4-wk Price Performance% from 52-wk HighEPS Growth Rate Div. Yield
1Micron Technology Inc.MU-Q$68.7$59.7837.6%-5.7%105.3%0.0%
2Microchip Technology Inc.MCHP-Q$23.0$97.2518.3%-4.2%36.0%1.5%
3Broadcom Ltd.AVGO-Q$107.2$260.595.2%-8.8%24.1%2.7%
4Texas Instruments Inc.TXN-Q$108.8$109.977.1%-8.9%14.6%2.3%
5ON Semiconductor Corp.ON-Q$11.1$25.7415.2%-5.0%18.6%0.0%
6Analog Devices Inc.ADI-Q$35.0$94.0910.5%-4.4%20.1%2.0%
7Intel Corp.INTC-Q$242.3$51.8614.3%-3.6%13.8%2.3%
8Marvell Technology Group Ltd.MRVL-Q$11.4$23.405.1%-7.1%13.2%1.0%
9Skyworks Solutions Inc.SWKS-Q$20.4$111.947.0%-4.9%13.1%1.1%

Source: Recognia