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In Case The Bulls Are Wrong About Analog Devices

David Pinsen profile picture
David Pinsen


  • Analysts are bullish on Analog Devices after its recent beat-and-raise quarter.
  • The stock passes Portfolio Armor's two preliminary screens, but our site estimates a modest potential return for it over the next several months, ranking 515 names higher than Analog Devices.
  • In the event the bulls end up being wrong about Analog Devices, we present two ways shareholders can stay long while limiting their risk.

ADI image.Analog Devices identifies with the bobsledding precision (Credit: Twitter)

Most Analysts Are Bullish On Analog Devices

After Analog Devices' (NASDAQ:ADI) beat-and-raise earnings last month, a number of analysts raised their price targets for the stock. What if the bulls end up wrong though? We present a couple of ways ADI shareholders can limit their risk in that case. First, let's look at the bullish case for ADI and our site's take on it.

The Bull Case For Analog Devices

As the screen capture below from Nasdaq shows, ADI bulls are ascendant among sell-side analysts, with 15 out of 19 rating the stock a "buy" or "strong buy."

Image via Nasdaq. The bullishness isn't limited to the sell side. Brian Hamilton, Growth & Income editor at Zacks, is a bull as well, as you can see in the interview below posted last week.

On the income side, Hamilton liked the recent 7% increase in ADI's dividend, and on the growth side, he liked the consistency of 14 consecutive earnings beats, and the recently raised estimates for the company. Hamilton was also bullish on the macro picture for ADI, saying "we're still in the upswing of the semiconductor cycle."

Our Site's Take On ADI

Analog Devices currently passes Portfolio Armor's two screens to avoid bad investments, but the site's potential return estimate for it over the next several months is fairly modest. Net of hedging cost, ADI's potential return ranks it #516 in our system, between Berkshire Hathaway (BRK.A) (BRK.B) and Ryanair Holdings (RYAAY), as you can see in the screen capture from the site's admin panel below.

Image via PA.The potential return for each name is shown in the fourth column from the right.

Given that our site isn't bearish on ADI, and most analysts are bullish on it, why consider hedging it? One reason is that the analysts

Our top ten names each week have returned 19.77% over the next 6 months, versus 12.75% for SPY. To see this week's top 10 names, sign up for a free two-week trial here.

This article was written by

David Pinsen profile picture
I developed the hedged portfolio method of investing at Portfolio Armor, and I run a Marketplace service at Seeking Alpha based on it called Bulletproof Investing.

Analyst’s Disclosure: I/we 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (7)

yardbird99 profile picture
Personally, I would put ADI in the top 30 stocks for risk-adjusted growth and income.
So we can expect a modest return at low risk. I'm ok with that
David Pinsen profile picture
That seems likely, Derek. Hedging is to protect against unlikely events.
yardbird99 profile picture
Consensus forward P/E is 15.95. They have proprietary analog designs and high customer switching costs, creating a wide economic moat. Plus, they are in a growth industry. It's true the price could fall, but that applies to every stock on the market. What seems to be missing in this article is the bear scenario for how and why the price could fall, and why such a fall would be worse than other stocks in a general downturn.
Its missing because that bearish argument didn't exist
David Pinsen profile picture
Beyond the risk of an overall market correction, I'm not aware of a bearish catalyst for ADI. But, from a risk management perspective, the salient question isn't whether it will fall more than the market in a correction, but whether it will fall beyond your risk tolerance.
dunnhaupt profile picture
The P/E of 264 would certainly be enough to scare most people away.
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