The technology sector is one of the worst performing sectors in the market over the last 6 months. During the last 6 months it has lost nearly 18% of its value compared to the S&P 500, which has lost 6% of its value. A large portion of its loss is a result of weak performance by the Semiconductors industry which has lost its momentum over the last 9 months. Within the technology sector, more specifically the semiconductor industry, I have found 4 stocks that I am optimistic of moving forward. Shareholders have experienced ups and downs with these 4 stocks but I believe that each of these companies could be on the verge long-term success.
NVIDIA Corporation (NVDA) trades in the semiconductor industry with a market cap of $8.9 billion. The company is a provider of visual computing technologies and the creator of the graphic processing unit (GPU). The company's processors are used in a large portion of all smart phones and tablets created with the Android operating system. The company also has a new quad-core processor that will be available in tablets later this year. The stock has experienced a great deal of loss over the last 4 months, losing nearly 25% of its value. This loss is an improvement considering it's gained nearly 26% over the last month. I believe the stock could see large gains as its new technologies and use within the Android system become more common. This, along with the Android system's long term growth and my belief that Motorolla Mobility (MMI) will produce more handsets, lead me to believe this company is just getting started. The company's revenue and earnings have substantially improved over the last 2 years, with this year on pace to continue the trend. The company has increased guidance for both the upcoming quarter and full year 2013. I believe the company's strengths and its potential for more growth are encouraging, and outweigh the concerns of increased competition and dependence on the Android operating system. The stock is 62% more volatile than the market which means the stock could see large gains if the market recovers, but could also see additional short-term loss if the market were to drop. Either way, I believe it's well positioned, with a strong balance sheet, and long term potential within a fast growing market.
Advanced Micro Devices (AMD) is one of the largest computer chip producers of both commercial and consumer markets. Shareholders of this stock have experienced a rough 6 months, with a loss of over 20%, as the company searched for new leadership and appeared to be without direction. However, I am very confident in the new CEO Rory Reed whose previous terms with Lenovo and IBM provide assurance in his ability to perform the job. But he has a tough job ahead of him, as the smart phone and tablet industry must become a priority and the company must close the gap between competitors such as Intel (INTC) and NVIDIA. I believe he will be successful. Rory Reed has a history of developing strong work environments and has been a part of several acquisitions that helped develop new segments of business. At Lenovo Rory Reed helped purchase the personal computing division from IBM, his previous place of employment. I believe AMD is well positioned for change but the company must develop a plan that is strong enough to maintain long term success. I don't believe there is a quick fix for this company but I do believe it's trading at the bottom of its range. This could give investors the opportunity to take advantage of a cheap stock that has the potential to grow. The company has several segments of revenue that will continue to produce but I don't believe it has anything that will separate it from the competition, therefore innovation is necessary. The only area that could prevent change in the company's future is its high debt-to-assets ratio which could keep the company from growing or making significant changes. And while I believe the company's emphasis on graphics and CPU will be crucial to its future success, I also believe small acquisitions and new directions will be equally as crucial if the company wishes to be relevant in the smart phone industry.
Applied Material (AMAT) is an example of a stock that has lost a large portion of value from misfortunes within the industry. The company operates in 4 segments with its largest being Silicon Systems; about half of its revenue. The stock got crushed as it beat expectations, with net income that more than tripled after expectations were lower than analysts had expected. However, after the earthquake and Tsunami in Japan it should be no surprise that expectations have been lowered along with a poor outlook on the solar industry during the 4th quarter. The stock is now trading near 52 week lows but has traded in a tight range for the last month after posting a 25% loss during the previous 6 months. The stock trades with a yield of 2.88 and has improved on nearly all aspects of its income statement during the last 2 years. The company also has a strong balance sheet, with low debt, and assets that have significantly increased. After considering that the company has a 5 year return on assets of nearly 65% greater than its industry, I believe it indicates the company is moving in the right direction as it continues to post strong quarters and accumulate additional assets.
Marvel Technology Group (MRVL) has posted gains of more than 18% during the last month with a solid earnings report and impressive guidance that has been encouraging to investors. The company has increased profit margins each of the last 4 years and has a strong balance sheet with hardly any debt. Marvel makes chips for cell phones, applications, networking, disk drives, etc. and has been an industry leader for many years. I, like many, find the company's most recent earnings report to be encouraging. Marvel released earnings that grew 12% quarter-over-quarter and increased sales 18% from the very important mobile & wireless market. The company released a strong outlook for the upcoming quarter as its smart phone segment shows signs that it's making progress. The company has been unsuccessful, until this point, in the smart phone industry with a presence in only a few of the Blackberry handset devices. The company has put an emphasis on this growing market but with a very competitive industry along with losing a large portion of its Research in Motion (RIMM) business investors have been skeptical of its long term growth opportunities. However, I believe the stock has potential and its TD smart phones may continue to improve. If Marvel could be competitive in the smart phone industry then it could experience a great deal of success. It has other venues of business, including strong presence in other countries such as China. It doesn't need to control the market, it just needs to be competitive and if so it could open many doors for this company that has no debt and strong assets along with high profit margins.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in MRVL, AMAT over the next 72 hours.
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