by Timothy Lutts
One of my favorite stocks today– for aggressive investors only– is Silicon Laboratories (SLAB), a key player in the highly cyclical semiconductor industry. The stocks in this industry act like rockets; they zoom to the sky, and then they fall to the ground. If you don’t know what you’re doing, you can get hurt. But if you do know, you can make big money fast in this group, especially if you know when to walk away.
Silicon Laboratories has been recommended in Cabot Top Ten Trader in 2003 and 2006 and 2009, and investors who stayed on their toes made money each time. But between each of those periods, the stock fell to the ground like a dead asteroid, as investors exited en masse.
But now SLAB is back in favor, and I think investors who get on here will do very well. Here’s what editor Mike Cintolo wrote about the company in last week’s issue of Cabot Top Ten Trader:
“With sales of electronic gadgets on the rise, here Silicon Labs is again, with its huge assortment of microcontrollers, wireless transmitters and receivers, touch-sense controllers, sensor, modems, clocks and oscillators and other devices. The company is an innovator, plowing more than a quarter of earnings into R&D, and a wave of new products is helping to lure market share away from the competition. Silicon Labs is a fabless designer (meaning that it partners with world class manufacturers rather than owning its own factories), and sells to China (28% of 2010 revenue), Taiwan (16%), the U.S. (14%) and Korea (13%), with the other 29% scattered around the world. The company’s Q3 results last week beat analysts’ estimates handily, and guidance for the next quarter was solid, putting Silicon Labs near the head of the microchip sector.”
As for the stock, “SLAB got slammed three months ago when management’s overly cautious guidance (plus the early August downtrend in the market) keyed a drop from 42 to 31. The stock hung in there, making small gains in volatile trading, then blasted off last week to its highest level since May. SLAB will likely need some time to consolidate gains at this level, so a dip to 42 or so is likely. That’s an advantageous place to get in.”
Since then the stock has traded as low as 41, and I think you can buy it now. As with any high-volatility stock, take care to use protective measures like stop-losses.
Disclosure: No positions