Nate's Notes on Chips

06/27/2014 8:00 am EST

Focus: STOCKS

Nate Pile

Editor, Nate’s Notes and The Wagmore Advisory Letter

Semiconductor stocks were the last technology group to join the rally and finally flashed a “bullish” signal a little over a year ago; the sector has been fire lately, explains Nate Pile, editor of Nate’s Notes.

Cirrus Logic (CRUS)

Investors remain anxious about what sort of exposure Cirrus Logic is likely to have in new Apple products as we head into the second half of the year. (Nevertheless, the stock has been acting great despite the pessimism.)

Although I share a bit of this concern, I am adding more shares to my portfolios. We are currently very underweighted in this stock, and if these fears prove to be unfounded, this stock could really scream from current levels. CRUS is a strong buy under $20 and a buy under $24.

NVIDIA (NVDA)

After spending close to four months consolidating in the $18-$19 range, NVIDIA’s stock appears to be breaking out in a manner that suggests it could run into the low-$20s (if not higher) as part of its next leg up.

Chip stocks have been on fire lately, and though competition is fierce in the markets in which NVIDIA competes, the company seems to be doing a good job carving out market share for itself.

This fact, along with the observation that the stock has been known to make big moves once trends get underway, suggests to me that we should look at the rising stock price as a reason to buy rather than an excuse to sell. NVDA is now a strong buy under $18 and a buy under $21.

NXP Semiconductor (NXPI)

Despite the fact that the company filed for (and then completed) a secondary offering of just over 17 million shares of stock to be sold on behalf of existing shareholders, I am pleased to report that NXP’s stock has continued to push into new all-time high territory in recent weeks.

To be sure, this trend cannot go on forever; however, there is no denying that it is currently underway, and, as I hope you know by now, our job is to ride the trend until we have clear evidence that it is running out of steam.

Our portfolio are already quite heavily-weighted in the stock, but those of you who do not yet have a position are encouraged to start one sooner rather than later. NXPI is now considered a strong buy under $58 and a buy under $65.

Skyworks Solutions (SWKS)

Along with most of the other semiconductor stocks we own, Skyworks has also been on fire lately. Because it is a supplier to Apple, those of you who have been with us for awhile now will recall that, as Apple irrationally fell out of favor with the market a few years ago, so did Skyworks’ stock.

And now that Apple’s stock is heading northwards again, it should come as no surprise that Skyworks is joining the party too!

At some point, the trend will come to an end, but until that day arrives, your job is to continue owning as much of the stock as you comfortably can while still being able to sleep at night. Don’t be afraid to add to your position on pullbacks! SWKS is now a strong buy under $42 and a buy under $46.

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