Micron: Red Hot?

03/11/2014 8:00 am EST


Nicholas Vardy

ETF Strategist, Oxford Club

Our latest featured recommendation is a red-hot semiconductor stock that has already generated over 188% for investors in the past 12 months, and it is already up over 11% in 2014, explains Nicholas Vardy, editor of Bull Market Alert.

Here's why I expect Micron Technology (MU) to move up even further in the weeks ahead.

First, Micron is in an enviable position in the otherwise boom-and-bust semiconductor sector.

Demand for the DRAM, NAND flash, and NOR flash memory it manufactures is exploding, as modern smartphones, tablet computers, and laptops require a lot more memory than similar devices made two years ago.

In addition, industry consolidation is allowing Micron to enjoy the benefits of reduced competition. And the industry's focus on new technology should limit manufacturing capacity over the next few years—a factor that also is bullish for the stock.

Second, despite its recent strong run, Micron still looks surprisingly cheap. The stock currently is trading at a forward price-to-earnings (P/E) ratio of only 9.52.

The company expects further earnings growth going forward after its strategic acquisition of Elpida. No wonder Micron is one of the top holdings of the biggest hedge funds, according to publicly available 13F disclosure filings.

Third, Micron pulled back in the past week and is now approaching technically oversold levels. This makes it a good time to take a position—especially given that the technology sector has been such a strong outperformer.

Several analysts have recently published very bullish pieces on Micron, putting a $40 target price on the stock. That's over 65% upside from current levels.

So, buy Micron Technology and place a stop at a wide $20.50. With Micron boasting a beta of 1.86, this is a volatile stock.

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