Balance Sheet Bargains - Semiconductors

by: John Connors

The purpose of this screen is to identify strong companies with stocks that may have already, or very soon will be, bottoming. Of course, depending on your view, these may also be short-sale candidates given they are bouncing around their 52-week lows.

This screen looks for stocks with at least $300 million in market capitalization, average daily volume > 100,000 shares, strong short-term asset positions (quick ratio greater than three), price within 10% of the 52-week low and price greater than $5. In addition, to filter out stocks that are being targeted by short sellers, these have low open short interest of the available float.

The most recent run of this screen yielded four stocks, all of which are in the semi-conductor industry. These stocks are a bit off the beaten path of Intel (NASDAQ:INTC), AMD (NASDAQ:AMD) and Qualcomm (NASDAQ:QCOM), yet could still offer some good value.

Some quick research shows that the only thing driving these stocks down is the combination of a normal industry cycle and a secular shift away from PCs to mobile computing devices. These four stocks have some of their business tied to PCs but other parts that have nothing to do with PCs. Included with each company profile is their business description from, which shows the diversity of their portfolios.

What is most interesting is that even with these bearish drivers, these four stocks have relatively small open short positions. The low open short positions might be indicating that the shorts are not expecting much further downside, if any.

(NASDAQ:ALTR) Altera has a very healthy quick ratio of 5.8 with $9.34 of cash on hand. Trading around $31 a share, this is almost 30% of the total value in cash. The open short position was just 1.7% as of November 15. ALTR pays a dividend with a current 1.2% yield. The average analyst target is $35.91, or a 16% upside. The trailing p/e is 17.3, only slightly below the industry p/e of 18.

Altera Corporation, a semiconductor company, designs, manufactures and markets programmable logic devices, HardCopy application-specific integrated circuit devices, pre-defined design building blocks, and associated development tools. The company's PLDs consist of field-programmable gate arrays and complex programmable logic devices, which are standard semiconductor integrated circuits or chips to perform desired logic functions in the electronic systems; and HardCopy structured ASIC devices that comprise transition customer designs from high-density FPGAs to low-cost non-programmable implementations for volume production. Its products primarily include Stratix series high-end, system-level FPGAs; Arria series mid-range transceiver and embedded processor equipped FPGAs; Cyclone series low-cost transceiver and embedded processor equipped FPGAs; MAX series CPLDs; and HardCopy ASICs. The company's products also comprise intellectual property cores in hard and soft forms that are pre-verified building blocks that execute system-level functions; and development tools consisting primarily of the Quartus II software for design entry, design compilation, design verification, and device programming. It serves customers primarily in the telecom and wireless, industrial automation, military and automotive, networking, and computer and storage markets. The company markets its products in the Americas, the Asia Pacific, Europe, the Middle East, Africa, and Japan through a network of distributors, independent sales representatives, and direct sales personnel. - from

(NASDAQ:NVDA) NVIDIA has a solid 4.0 quick ratio with $5.50 in cash per share on hand. Trading around $12 per share, this makes 46% of the price straight cash. NVIDIA pays a 2.5% dividend. The open short position was 2.8% as of November 15. The average analyst target is $15.81 gives this stock a potential 32% upside. NVIDIA's trailing p/e is 14.9 vs. the industry p/e of 18, provides a possible 21% upside. By either calculation, this stock has room to run.

NVIDIA Corporation provides graphics chips for use in smartphones, personal computers, tablets, and professional workstations markets worldwide. It operates in three segments: Graphic Processing Unit, Professional Solutions Business, and Consumer Products Business. The GPU segment offers GeForce discrete graphics and chipset products, which support desktop and notebook PC's, as well as sells flash memory products. The PSB segment provides Quadro professional workstation products and Tesla high-performance computing products to deliver high graphics performance and application compatibility for professionals in the manufacturing, entertainment, medical, science, and aerospace industries. The CPB segment offers Tegra system-on-chip products for smartphones, tablets, automotive infotainment systems, and other similar devices; and Icera baseband processors and radio frequency transceivers for mobile connectivity. This segment also licenses video game consoles and other digital consumer electronics devices. The company sells its products to original equipment manufacturers, original design manufacturers, add-in-card and motherboard manufacturers, system builders, and consumer electronics companies. - from

(NASDAQ:QLGC) QLogic has a very strong 7.8 quick ratio with $5.22 in cash per share on hand. Trading around $9 per share, this means a whopping 58% of the price is straight cash. The open short position was the highest of this list at 5.4% as of November 15. The average analyst target of $10.33 gives this stock a potential 15% upside. QLogic's trailing p/e is 4.5 vs. the industry p/e of 18, suggesting a significant possible upside.

QLogic Corporation designs and supplies network infrastructure products that provide, enhance, and manage computer data communication. It designs and develops application-specific integrated circuits, adapters, and switches based on fiber channel, Internet small computer systems interface, Fiber Channel over Ethernet, and Ethernet technologies. The company offers host products, including fiber channel adapters; iSCSI adapters; FCOE converged network adapters; and 10Gb Ethernet adapters. It also provides network products, such as blade, edge, and high-port count modular-chassis fiber channel switches; fiber channel virtualized pass-through modules; universal access point switches; enhanced Ethernet pass-through modules; and storage routers. In addition, the company offers silicon products comprising fiber channel controllers, iSCSI controllers, converged network controllers, Ethernet controllers, converged switch controllers, and converged LAN on motherboard controllers. Its products are used primarily in server and storage subsystem solutions that are used by small, medium, and large enterprises with business data requirements. The company sells its products primarily to the original equipment manufacturers and distributors worldwide. - from

(NASDAQ:VLTR) Volterra has a whopping 10.6 quick ratio with $5.70 in cash per share on hand. Trading around $17 per share, this means 34% of the price is cash. The open short position was the highest of this list at 3.4% as of November 15. The average analyst target of $23.88 gives this stock a potential 40% upside.

Volterra Semiconductor Corporation engages in the design, development, and marketing of analog and mixed-signal power management semiconductors for computing, storage, networking, and consumer markets. Its products include integrated voltage regulator semiconductors, integrated power protection and distribution semiconductors, and scalable voltage regulator semiconductor chipsets that transform, regulate, deliver, and monitor the power consumed by digital semiconductors. The company sells its products primarily to original equipment manufacturers, original design manufacturers, contract equipment manufacturers, and merchant power supply manufacturers directly through its internal sales force, as well as indirectly through distributors and outsourced suppliers. It has operations in the United States, China, Singapore, Japan, Taiwan, and Germany. - from

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

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: I am not a registered investment advisor and do not provide specific investment advice. The information contained herein is only my opinion based on personal research and offered for informational purposes. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any equity, do your own research and reach your own conclusion. Investing includes risks, including loss of principal.

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