A few major themes have been at play over the past year. While tech stocks have largely sold off thanks to a decline in investors willing to take on risks, a shortage in the semiconductor industry has created a unique situation.
These companies are poised for their best growth in years, yet are also trading at their best valuation in years. Investors who accumulate shares of these leaders now can benefit when that price trend changes.
Among the semiconductor giants, there’s some jockeying between the big players in terms of new offerings and features. With what looks like the best combination for current market conditions, Advanced Micro Devices (AMD) has gotten an analyst upgrade as the best among the top players.
The company’s high core offerings relative to competitors seems to give it an edge in the chip space. Yet shares are down 25 percent in the past year, even as revenue has jumped 70 percent. That’s taken shares from over 40 times earnings last year to about 16 times forward earnings today.
Action to take: The company has no bankruptcy risk, always a concern in the tech space when the market is selling off. AMD will continue to be an industry leader, and it trades at a price where it makes sense to start accumulating shares now.
For traders, the March $100 calls, last going for about $6.30, offer investors a mid-to-high double-digit return potential. The calls should likewise be accumulated, using down days in the stock to add to the position.
Disclosure: The author of this article has a position in the company mentioned here, and may further trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.