2 Cash Rich Semiconductor Stocks To Consider

Includes: AVGO, IRF
by: Bret Jensen

The semiconductor industry has had a challenging September. The sector has underperformed the S&P by some 6% during the month (See Chart Below). The space is worth reviewing for possible bargains. Here are two cash rich, specialty semiconductor manufacturers worth considering.

"International Rectifier Corporation (NYSE:IRF) designs, manufactures, and markets power management semiconductors for distributors, original equipment manufacturers, and contract manufacturers in the Americas, Europe, and Asia." (Business description from Yahoo Finance)

4 reasons IRF could be a bargain at $16 a share:

  1. IRF has started to attract interest from insiders. Two insiders pick up some $100 in new shares in late August.
  2. The company has over $350mm in net cash on its balance sheet (30% of market capitalization).
  3. The stock is selling at 94% of book value and at the bottom of its five year valuation range based on P/S. The median analysts' price target is $22 a share on IRF.
  4. The stock has some good median term technical support here. (See Chart)

"Avago Technologies Limited (NASDAQ:AVGO) engages in the design, development, and supply of analog semiconductor devices with a focus on III-V based products." (Business description from Yahoo Finance)

4 reasons AVGO has value at under $35 a share:

  1. The 17 analysts the cover the stock have a median price target of $42 a share. Canaccord Genuity and UBS initiated the stock as a "Buy" in the third quarter.
  2. The company has almost $1B in net cash on its balance sheet and the stock yields 1.8%.
  3. The stock is selling in the bottom third of its historical valuation based on P/S, P/B, P/CF and P/E.
  4. The stock has some short term technical support just below its current price level (See Chart)

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in AVGO over 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.