May 10th, 2007
Five Reasons NOT to Buy Semiconductor Stocks Today
Lest you think we were going soft, we hereby balance our earlier enthusiasm for semi stocks with our more customary caution. The five reasons to avoid semiconductor stocks right now include:
- The fundamentals will get worse before they get better. While supply indications grew slower than demand in April, the turn followed 16 months of too much capacity being ordered. As that capacity comes on line, the inventory situation will worsen and margins will get hit more. It is not at all certain that estimates reflect this.
- It is May. Sure, sell in May and go away is a cliche. Things often become cliches for a reason.
- Demand? What demand?
- Valuations are too high because investors are hoping for more premium buyouts. They will happen, but not to every name in the sector.
- The last bear may no longer be standing.
Food for thought.
Disclosure: William Trent has a long position in SMH.
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Topics: AGR, Advanced Micro Devices (AMD), Altera (ALTR), Analog Devices (ADI), Applied Materials (AMAT), Cadence Design Systems (CDNS), Cree (CREE), Elpida (ELPDF.PK), Freescale (FSL), Hynix Semiconductor (HXSCF.PK), Intel (INTC), Intersil (ISIL), KLA-Tencor (KLAC), LSI Corp. (LSI), Lam Research (LRCX), Lattice Semiconductor (LSCC), Linear Technology (LLTC), MEMC Electronic Materials (WFR), Marvell Technology (MRVL), Maxim Integrated Products (MXIM), MicroSemi (MSCC), Micron Technology (MU), NVIDIA (NVDA), National Semiconductor (NSM), ON Semiconductor (ONNN), PowerWave Technologies (PWAV), Qimonda (QI), STMicroelectronics (STM), Samsung Electronics (SSNLF.PK), Sandisk (SNDK), Semiconductor HOLDRS (SMH), Semiconductors, Silicon Laboratories (SLAB), Standard Microsystems (SMSC), Stock Market, Supertex (SUPX), Taiwan Semiconductor (TSM), Texas Instruments (TXN), United Microelectronics (UMC), Winbond Electronics (WBEMF.PK), Xilinx (XLNX) | RSS
