An assessment by Briefing.com this afternoon.
<<Sifting Through the Semiconductor Rubble :
For the semiconductor sector this has been a particularly brutal September, as the Philadelphia Semiconductor (SOX) index is down 17%, and trading at new multi-year lows. With preannouncement season holding the potential for additional Q3/FY02 profit warnings, group is apt to remain on the defensive for at least another couple of weeks. However, amid the storm there are some positive developments that suggest that traders might want to begin doing some nibbling in the beaten down sector.
First of all, several component issues have dropped to the point that they're trading at 1-to-2x cash on hand. Though companies continue to burn through cash during the downturn, cash levels should at least provide a cushion against additional weakness. In other words, the downside risk from current levels no longer looks so severe. Among the stocks that fit this category are TQNT, VTSS, AMD, CRUS, ESST, NVDA
Second, valuations are at historic lows with many of the stocks trading at deep discounts to sales and book value. AMD, FCS, CRUS and NVDA are among the stocks trading at discounts to sales, while TQNT, VTSS, AMD, CRUS, ZRAN, GNSS, LSCC, CMOS, KLIC sell below book value.
Third, we are starting to see some aggressive insider buying within the sector -- something that has been missing throughout most of the three-year decline. Action by insiders suggests that we may be closer to a bottom than the market currently expects. Insiders are buying stock in LSI, VTSS, NVDA, ALTR.
Finally, divergence between SOX and its long-term moving averages is abnormally and unsustainably wide. In other words, the sector is deeply oversold and due for a bounce. And for those traders looking to play that bounce, you might want to start by doing some additional research on the names listed above. -- Robert Walberg, Briefing.com>> |
