Have Chip Stocks Lost Their Magic?

The chips are dead! Long live the semis! Not semiconductors themselves, of course, since semiconductors are ubiquitous. Rather, I am lamenting the absence of cyclicality in the stocks.

Oh, there was a wistful time when chip stocks would run up 400% over six quarters then collapse 85% over the next two, making the group a fun and profitable industry to trade. But, as we've noted before, the semis have become boring, akin to the Coke's and Proctor's of the world.

This observation was punctuated with an exclamation point yesterday on the news that Linear Technology (LLTC) was proposing a $3 billion buyback representing 30% of the company's market cap.

One could argue that in the past, volatility of the analog stocks was not representative of the underlying fundamentals of the business. High technological barriers to entry, long lead times and fairly stable demand (for semiconductors) argument the case, and truthfully, I cannot disagree. But, alas, I miss the days when they would bounce around like mad.

I own Maxim Integrated (MXIM) , a position I entered a few months back when it was at its historical lows on valuation, as least how I measure it. The stock lifted yesterday in sympathy.

If it continues to rise, I will exit the position as the group is no longer the one I grew to love. Sigh!

For the most part, anyway. There are a few situations where stocks are getting hammered and may fall to historical valuation lows. I am keeping an eye on both Micron (MU) and Sandisk (SNDK), two memory companies, albeit different types of memory. However, if they fall another 20%-30%, I will take a hard look at the stocks.

MU/SNDK 1-yr comparison chart