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Investors looking to wade deeper into the waters of technology stocks might do well to consider the semiconductor designers and manufacturers from the list below.

We began by screening all semiconductor stocks for those with bullish sentiments from institutional investors with net purchases over the current quarter above 5% of share float. This indicates hedge funds are optimistic about the growth of these companies.

Next we looked for signs of undervaluation indicated by high ratios of levered free cash flow/enterprise value. Levered free cash flow (what's left after deducting interest payments on outstanding debt) plays an important role in paying for dividends and further expansion of the business.

Enterprise value, an alternate measure of a company's value, is calculated as market cap plus debt, minority interest and preferred shares, minus total cash and cash equivalents.

When companies have ratios of levered free cash flow/enterprise value in excess of 10%, it may indicate that the company as a whole is being undervalued.

For an interactive version of this chart, click on the image below. Analyst ratings sourced from Zacks Investment Research.

Use this list as a starting point for your own analysis.

1. Vishay Intertechnology Inc. (VSH): Manufactures and supplies semiconductors and passive electronic components in the United States, Europe, and Asia.

  • Market cap at $1.7B, most recent closing price at $11.86.
  • Net institutional purchases in the current quarter at 9.1M shares, which represents about 6.94% of the company's float of 131.21M shares.
  • Levered free cash flow at $127.01M vs. enterprise value at $1.22B (implies a LFCF/EV ratio at 10.41%).

2. Cascade Microtech Inc. (CSCD): Creates, manufactures, and supplies wafer probing and test socket solutions for the electrical measurement and testing of high performance chips.

  • Market cap at $98.97M, most recent closing price at $6.95.
  • Net institutional purchases in the current quarter at 474.1K shares, which represents about 6.24% of the company's float of 7.60M shares.
  • Levered free cash flow at $9.93M vs. enterprise value at $77.25M (implies a LFCF/EV ratio at 12.85%).

3. Applied Micro Circuits Corp. (AMCC): Designs, develops, markets, and supports integrated circuits for processing, transporting, and storing of information worldwide.

  • Market cap at $473.01M, most recent closing price at $6.99.
  • Net institutional purchases in the current quarter at 3.4M shares, which represents about 6.09% of the company's float of 55.81M shares.
  • Levered free cash flow at $72.60M vs. enterprise value at $369.58M (implies a LFCF/EV ratio at 19.64%).

4. Aeroflex Holding Corp. (ARX): Provides of radio frequency (RF) and microwave integrated circuits, components and systems used in the design, development and maintenance of wireless communication systems in the United States, Europe, the Middle East, Asia, and Australia.

  • Market cap at $609.8M, most recent closing price at $7.18.
  • Net institutional purchases in the current quarter at 1.2M shares, which represents about 7.98% of the company's float of 15.04M shares.
  • Levered free cash flow at $135.94M vs. enterprise value at $1.17B (implies a LFCF/EV ratio at 11.62%).

*Institutional data sourced from Fidelity, free cash flow data sourced from Yahoo! Finance and all other data sourced from Finviz.

Source: Hedge Funds Are Buying These 4 Undervalued Semiconductor Stocks