Semiconductor stocks, like many other sectors, have fallen sharply this year due to concerns about the economy. Investors were concerned that mixed forecasts had arrived in the second quarter, suggesting that customers of these companies may spend more in parallel to supply chain problems.
The S&P 500 is down 19.8 percent this year, while the SOX is down 33 percent.
Egan pointed to a decline in the rating amplifiers of the two indices. For both, he says P / E rates are just 5 to 10 percent higher than the lowest level seen in 2018. Of this It also highlighted investor concerns about higher interest rates and growth.
However, the analyst noted the cyclical nature of the semiconductor market.
This is a cyclic field – recovery occurs following a recession, and then, when the basics return, the rating amplifiers return to normal.
– He said.
In the short term, the semiconductor is predicting a further decline in the stock market, but he also pointed out that we will finally reach a low point, from which the SOX index will not only rise again in the next few years, but also double. A pretty attractive opportunity.
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Egan pointed out that with the need for semiconductors, the use of chips is increasingSuch as data centers, cars, industrial use and sanitation. In light of this, semiconductor sales are expected to double between $ 20,000 by 2020, according to Columbia ThreadNeed.
The researcher also spoke about the fact that the quality of a company or an industry is structurally variable, offering three times better sales, better margins and often better rating amplifiers. For many stocks, this was one of the drivers of “multi-baker” income for us, and then he said, and then to them, it was the real source of the alpha (i.e., more than the benchmark’s income).
These values may be surprising due to the stocks we have invested in Nvidia, Marvel Technology, Broadcom and On Semiconductor As the semiconductor industry is full of similar opportunities, the list could go on and on.
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