the Trade-Radar + TradingStockAlerts blog

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 outlook Broadcom (BRCM) had a good quarter but offered dismal guidance Teradyne (TER) had a strong first quarter but warned the second quarter might be more challenging Novellus (NVLS) is pretty much in the same boat with Broadcom and Teradyne Applied 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 bette...

I have a stock screener setup that looks for stocks with several fundamental growth characteristics combined with two technical characteristics. Here's how it looks: Company is profitable; ie, PE above zero Quarterly YoY sales growth positive Quarterly YoY earnings per share growth positive Return on Equity over 20% Debt to Equity ratio under 1 Stock's performance is 5% above the S&P 500 MACD just turned bullish To this list I added one more criteria: price should be under $5. Two stocks popped up: Full House Resorts, Inc. (FLL) - a company in the Consumer Services-Misc. Amusement & Recreation sector InTest Corp. (INTT) - a company in the semiconductor automated test equipment sector Since I tend to be most interested in tech stocks, let me focus on inTest. inTest specializes in the hardware that interfaces between probes and the chips being tested. It also offers thermal testing equipment including test chambers. At a market cap of $42 million, they fa...

Two of the leading ETFs on the Trade-Radar ETF Scorecard report at Alert HQ Premium are semiconductor ETFs, specifically the Merrill Lynch Semiconductor HOLDRS (SMH) and the ProShares Ultra Semiconductors (USD). Both of these ETFs carry the highest possible score for maintaining a bullish trend. As an example, take a look at the chart of SMH below: How long can this go on? KPMG conducted a global survey of semiconductor executives. Most of the results are quite positive. Executives expect mid-single digit improvements in hiring, R&D and profitability in 2011 compared to 2010. That sounds good but in actuality, 2010 was a very strong year and the outlook for 2011, while quite decent, reflects a potential moderation in the pace of growth. In particular, the surveys indicates only 39% of executives expect revenues to increase by 10% or more whereas 54% expected 10% revenue gains in 2010. Similarly, 37% of respondents anticipate profitability growth in excess of 5% for 2011,...

Do two data points make a trend? Breakouts by power semiconductor companies are starting to establish a pattern. A couple of weeks ago I wrote about ON Semiconductor (ONNN) in a post titled " ON Semiconductor -- on a roll as it breaks out ". Today we have a breakout by Power Integrations (POWI) that is worthy of notice. The stock has appeared on our Trend Busters list based on weekly data. Here is the weekly chart: Note the breakout above the bearish trend line. If you look at a chart based on daily data, you will see that the stock is challenging its 200-day moving average. A little nudge and a bullish trend could be confirmed. Background --  Power Integrations, Inc. designs, develops, manufactures, and markets proprietary, high-voltage, and analog integrated circuits for use in high-voltage power conversion. Their ICs are used in TV set-top boxes, DVD players, desktop computers, liquid crystal display monitors, and power adapters for notebook computers as well as...

ON Semiconductor ($ONNN) popped up on a reversal alert screen on Tuesday evening. I only publish reversal alert lists on the weekends but now and then I do find some pretty interesting picks during the week. So let's start with the chart and we can take a look at the reversal in progress. There is a clear breakout that has taken place over the 50-DMA and the blue trend line. The stock is now right at a resistance level at $7.25. A move above that level would take it to the resistance level embodied by the 200-DMA. These two resistance levels will be a real test of how strong this breakout actually is. What also makes this stock interesting is the attractive valuation. Here are a few measures that make the point: The PE of 13 is modest (for a semiconductor company/growth stock) PEG is only 0.5 which is quite low Price to Sales is also modest at 1.48 Enterprise Multiple of 6.39 is definitely in the value stock range These numbers imply the stock is not over-priced. This n...

What is going on in tech these days and why is it important? If you read the post " Chart of the Day: Looking for Sector Leadership " at the Vix and More blog, you can see from the chart that tech is not the leading sector in the current rally (there are several sectors doing better) but but it has been performing decently. To see the rally continue, however, investors would like to see tech step up and assume more of a leadership role as it usually does when stocks break out to new highs. Something is holding tech back. Let’s look at three tech-focused ETFs and see graphically what is happening. The first is the iShares Dow Jones Technology Index ETF ($IYW). You can see a beautiful breakout above the 200-DMA and the 50-DMA. Indeed, the 50-DMA is now trending upward. The next one is the iShares S&P North American Tech-Software ($IGV). This ETF is in a full-fledged, all-out bullish trend. Finally we have the iShares S&P/GSTI Semiconductor ETF ($IGW). This E...

Intel's stock price has been circling the toilet lately but I'm not so sure the company deserves the scorn of investors. In actuality, the outlook is not nearly so dismal. First, let's start by looking back a couple of months. At that time Intel announced blow-out earnings and margins at the high end of their historical range. The stock popped briefly and then began a steady decline. Here is the chart: The nail in the coffin was when Intel announced that they were reducing their guidance for the third quarter of 2010. The stock dropped like a rock and took much of the semiconductor sector down with it. Why should Intel merit your attention? Here are four reasons: Intel has turned into a value stock. Looking at some of the classic valuation measures for Intel you would never suspect the company is a tech industry growth stock. For example, the PE is less than 11 which is very close to the 5-year low for the company, PEG is only 0.76, Enterprise Value/EBITDA is a mere...

From Business Wire today we have this report: Intel Corporation (INTC) today announced that third-quarter revenue will be below the company's previous outlook. The company now expects third-quarter revenue to be $11.0 billion, plus or minus $200 million, compared to the previous expectation of between $11.2 and $12.0 billion. Revenue is being affected by weaker than expected demand for consumer PCs in mature markets. Inventories across the supply chain appear to be in-line with the company's revised expectations. The company's expectation for third-quarter gross margin is now 66 percent, plus or minus a point, lower than the previous expectation of 67 percent, plus or minus a couple of points. The impact of lower volume is being partially offset by slightly higher average selling prices stemming from solid enterprise demand. It's surprising that just over a month ago, Intel reported stellar earnings and very positive forward guidance. Now today we suddenly have this...

So, what else is new? Let's look at the two opposing viewpoints. In this corner, the optimists -- Starting with the positive viewpoint, iSuppli is looking at the second half of the year as being a very positive time for the semiconductor industry. "iSuppli now predicts global semiconductor revenue in 2010 will rise by 35.1 percent to reach $310.3 billion, up from $229.6 billion in 2009. iSuppli’s previous forecast, issued on May 6, predicted growth of 30.9 percent this year. With an $80.7 billion increase, 2010 will bring the largest annual expansion in semiconductor revenue in history in dollar terms. In comparison, semiconductor revenue increased by slightly less than $60 billion during the next best year for dollar chip growth: the dot-com-fueled year of 2000." iSuppli points to several factors for the boom in chips: rising prices, inventory buildups and richer chip content in key electronic products like smart phones and advanced LCD-TVs. If things are going ...

I have been pounding the table for tech and especially semiconductors for months. Today, however, I came across a post at EETimes.com that throws a little cold water on my enthusiasm. Here is a quote from the article: Gartner Inc. analysts Bryan Lewis and Peter Middleton, said: ''Worldwide semiconductor revenue in 2010 is projected to reach $290 billion, a 27.1 percent increase from 2009 revenue of $228 billion. The outlook for the semiconductor industry has improved from Gartner's first quarter of 2010 forecast, when we projected worldwide semiconductor sales to grow 19.9 percent. ''Chip revenue growth is clearly outpacing system revenue growth, and that is a concern. Gartner's new semiconductor forecast has below-average growth in the second half of 2010, as we are anticipating a minor correction to realign semiconductor sales with electronic system sales.'' In other words, the chip makers are cranking out semiconductors but those companies build...

Semiconductor stocks have been flying lately, apparently reinforced by Intel's excellent earnings report. Reading the Intel conference call transcript, however, there were some notes of caution sounded by CEO Paul Otellini. He was positive on the remainder of the year but he was careful not to get carried away in his enthusiasm. Now comes another sign that maybe investors should ratchet up that sense of caution. Reading the Digitimes.com web site, there was a small article that raises the hair on the back of my neck. Here's what they said: Taiwan Semiconductor Manufacturing Company (TSMC), alarmed by its rising inventory level, has demanded IC design houses take delivery of their ordered wafer starts before placing new orders, according to industry sources. The company is seemingly worried by the possibility that their clients might have been overbooking. The article went on to say that TSMC's inventory of analog ICs is currently 50% higher than its safe level, while i...

On Tuesday Intel (INTC) reported strong earnings for the first quarter of fiscal 2010, with the company calling it the "best first quarter ever." As I suggested in yesterday's post, tech stocks and semiconductor stocks in particular should see a nice bump. The ProShares Ultra Semiconductor ETF (USD), which we own as part of our speculative portfolio, saw an increase of 7.73%. Not bad for one day. I can only say: bless you, Intel, for pushing stocks to new highs. Notes from the conference call -- Looking at net income, Intel recorded a sweet $2.4 billion for the first quarter, an increase of 288% compared to the first quarter a year ago. The net income beat estimates of $2.13 billion from analysts polled by Thomson Reuters. Diluted earnings per share were $0.43, beating analyst estimates of $0.38. This 13% beat is certainly meaningful. . The company recorded revenue of $10.3 billion for the first quarter, an increase of 44% compared to last year's first quarter. ...

Semiconductor ETFs have been on the rebound lately. Here’s a roundup of semiconductor news from the Digitimes web site that illustrates what’s going on in the sector. 12-inch wafer prices to rise 10-20% in 2Q10 Demand is sufficient to allow suppliers to foundries to raise their prices. The article goes on to say that TSMC and UMC have both seen full utilization rates at their 12-inch fabs, thanks to orders for FPGA, GPU, network and wireless applications, according to the sources. Suppliers have kept capacity at recession levels while ramping prices. Pricing power is a good indicator of growth in demand so, from that point of view, this can be considered a positive. Supply chain remains tight amid conservative capacity management, says iSuppli "As iSuppli has been reporting for several months, the recovering economy has brought renewed demand. However, component suppliers have yet to jump in with both feet when it comes to ramping up capacity," These companies are...

I came across an interesting little item on Intel today. The company, a fierce competitor and usually successful in attaining its objectives, seems to have taken a misstep. Last week Intel Corp. (INTC) acknowledged that it has no immediate plans to bring to market any Atom chips manufactured by Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC). This confirmed a report that the partnership announced by the two companies last year has hit a stumbling block. When it was announced, the partnership was a first for Intel, which had never before allowed outsourcing of it's core microprocessor technology. The objective of the partnership was to make it easier for other companies to integrate Intel's Atom microprocessor core into so-called "system on a chip" semiconductors. This would provide another channel for Intel to sell into the embedded, mobile and handheld device markets where integration of functions, small footprints and low power consumption are paramount consi...

SEMI, global industry association serving the manufacturing supply chains for the microelectronic, display and photovoltaic industries, recently released their forecast for semiconductor equipment sales for 2010 and 2011. The results are optimistic, indeed. Here is the money quote: The forecast indicates that, following a 31 percent decline in 2008, the equipment sector will post another significant decline of approximately 46 percent in 2009. SEMI expects the market to grow approximately 53 percent in 2010 to US$24.5 billion and to further increase about 28 percent in 2011 to US$31.2 billion. Here is a chart that plots these growth rates with 2007 considered to be 100% Despite the torrid growth rates forecast by SEMI, you can see that even by 2011, semiconductor equipment sales will not be up to the level of 2007. Talk about an industry downturn! Another interesting aspect of the forecast is the following table that breaks things down by equipment segment. Forecast by Equi...

On Monday I asked if semiconductors were a bargain yet . I proposed that very soon they would be and then the sector would be a clear Buy. Quite frankly, the sector didn't quite fall as far as I thought it would and now today, in the midst of a tech resurgence based on Cisco's better than expected results, semiconductors appear to running again. The following chart exhibits several aspects of technical analysis that are worth reviewing: Here we see the iShares Semiconductor ETF (IGW). There are five points to observe: IGW fell almost to a major support line as drawn by the horizontal magenta line.It has now bounced strongly up from that area. The blue line shows the trend line that was solidly broken but the ETF has closed decisively above it today. The horizontal red line is the first resistance line. IGW closed above this level today, also. Williams %R shows the ETF is just now moving out of an over-sold state. It should have room to run. The 200-day moving aver...

Semiconductors led the market up and now they are leading the market down. What gives? First, let's look at where we've been and where we are today. The chart below covers the period from the March low to today, November 2, 2009. The semiconductor ETF IGW is the red line, the Tech ETF IYW is the blue line and the S&P 500 index is the green line. You can see that semiconductors have been more volatile than the other two. You can also see that semiconductors outperformed the other two during much of this period, doing a bit better than the overall tech sector and significantly better than the S&P 500. Around the middle of October, however, semiconductors began to underperform. By today, semis were significantly below the overall tech sector and returned to the level of the S&P 500. The sector's growth premium had essentially been wiped out. This flagging performance of the semiconductors coincided with earnings season. Results of many stocks in the sector were res...

OmniVision Technologies (OVTI) has seen its stock price decline roughly 40% since mid-September. Can we expect things to turn around? Background -- The company designs and manufactures CMOS image sensors (CIS) for consumer electronics products such as digital cameras, videocams, phones, PCs, netbooks and notebooks. It is also establishing a presence in the automotive, medical and security markets. Image sensors are the chips that allow all these gadgets to take pictures, capture movies, see what is behind your car, etc. The market for these chips is clearly growing and, though Omnivision has serious competitors, they are one of the leaders in their field. Financials -- Here is a company that actually showed a sequential quarter-over-quarter increase in revenue when they reported back in August. Unfortunately, they couldn't quite translate that into a profit. Though revenue was up 18.5% to $105.6 million, the company still managed to lose $9.9 million or $0.19 per share. While still...

Wednesday the market sold off in the last hour and major indexes ended the day with losses. Semiconductor indexes were underwater pretty much the entire day. The iShares Semiconductor ETF (IGW) ended down 1.72%. Two well-known semiconductor companies were able to buck the downtrend and close with gains. Who were they and what were the reasons? Are there clues as to else might benefit? Buried in the semiconductor supply chain are the companies that actually produce the chips for the firms that do much of the design work and handle sales to end users and OEMs. The two biggest contract manufacturers of semiconductors are Taiwan Semiconductor Mfg. (TSM) and United Microelectronic Corp. (UMC). The item that gave both these stocks a boost was an article on the DigiTimes web site discussing utilization rates. The article quoted sources that indicated that both companies have ...seen a surge in demand for networking and wireless solutions. TSMC's 65nm-process capacity has been almost fully...

One of the hardest hit sectors in the downturn has been semiconductor equipment. With plunging demand for semis and rampant over-capacity, manufacturers of chip making equipment have been the zombies of the tech world. Are the dead beginning to come back to life? Today Applied Materials (AMAT) was upgraded by a Citi analyst based on strength in orders for equipment used to make photovoltaic cells. Analyst Timothy Arcuri believes that Applied Materials is about to sign a "significant" second wave of orders for its SunFab solar production equipment, including four new lines of about 300 megawatts in India. Winning solar contracts in areas beyond China and Taiwan is indeed a positive development. Last week KLA-Tencor (KLAC) was upgraded by an Oppenheimer analyst who said that said there are "early indications the cyclical recovery ... is blossoming into a real upturn." A quick look at the fundamentals -- We'll start by looking at a chart of the financials for AM...