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Showing posts from May, 2011

Yes, the Tech Sector is Undervalued

Here's why I think the Tech sector is currently undervalued:


This chart shows the Average PE for all profitable tech stocks with a market cap of at least $300 million. The Average PE is compared to the NASDAQ Composite.

The interesting thing is that even thought the NASDAQ Composite has moved up over the last few quarters as depicted in the chart, the average PE peaked after Q4 2010 earnings were reported and has declined ever since.

It's true I've tossed out some of the really high PE outliers but even when they are included, the chart has the same shape as that shown above. 

This suggests that Tech stocks today are anything but over-valued.

Further supporting this thesis is that the second half of the year is often strong for Tech and many analysts are predicting that this year will be no different.

Bottom line: tech stocks are undervalued and the coming seasonality puts the wind at their backs. Tech is likely a Buy right now.


Disclosure: in the tech sector I am long T…

Chip sector struggles but is the glass actually half full?

As earnings season has progressed, results have not been uniform across the semiconductor sector. In addition, sector analysts have not agreed on the future direction for chips.

Here is a brief selection of items to give you a flavor of what’s been going on lately:
Intel (INTC) started the ball rolling in earnings season by surprising everyone with a blowout quarter and positive forward guidance.Kulicke & Soffa (KLIC), a chip-equipment company, reported good earnings and a positive outlookBroadcom (BRCM) had a good quarter but offered dismal guidanceTeradyne (TER) had a strong first quarter but warned the second quarter might be more challengingNovellus (NVLS) is pretty much in the same boat with Broadcom and TeradyneApplied Materials (AMAT) announced they are buying Varian (VSEA) so it’s clear that AMAT certainly sees potential in the chip sector
This list is by no means complete but it illustrates that consistency is lacking in the sector. The situation is no better among analyst…

Always a Buy signal somewhere - easy ways to find the latest trend reversals

Trend reversals can be classic Buy signals. I wanted to let everyone know that there is a post up at our sister site TradingStockAlerts.com that explains several ways you can use their Premium Stock Screener to find trend reversals.

Not only does the post discuss finding the latest Trade-Radar reversal alerts and simple trend reversals (what we refer to as Trend Busters) but also ways of using Trend Performance in combination with a few other indicators.

The post is "Stock Market BUY Signals – Five ways to find bullish trend reversals" and I highly recommend it.

Read the post and go play with the screener. There are lots of variations you can apply to the basic setups discussed in the post. And remember, it's easy to get a free account that will give you access to the screener, let you save screener presets and save screener results to watch lists.