After setting a scorching pace last year, semiconductor stocks and exchange traded funds are succumbing to selling pressure to start 2022, but there might be a silver lining in that scenario.
Namely, there are now some attractive discounts available among chip equities, and that could open the door to opportunity with the Invesco PHLX Semiconductor ETF (SOXQ). SOXQ tracks the PHLX Semiconductor Sector Index, which is one of the most widely observed chip benchmarks.
Following a rough January in the technology sector, some members of that group, including some SOXQ components, are offering value.
“To find these names, CNBC Pro ran a screen on the S&P 500 tech sector that focused on each stock’s PEG ratio. The PEG is a stock’s price-to-earnings ratio divided by its estimated long-term earnings growth rate, and it is often used to evaluate growth stocks,” reports Hannah Miao for CNBC. “We then found the names with PEG ratios below 2 that have pulled back more than 10% in 2022. The majority of analysts covering these stocks also have buy ratings on them.”
Fourteen stocks appear on the list, of which nine are semiconductor stocks. Of that group of nine, nearly all of them appear on the CNBC list.
That includes Broadcom (NASDAQ:AVGO) and Nvidia (NASDAQ:NVDA), SOXQ’s largest and fourth-largest holdings, respectively. Those stocks combine for almost 16% of the ETF’s weight.
“NVDA’s unique combination of highly leverageable graphics silicon, software, scale, and systems expertise position it at the forefront of some the largest and fastest growth markets in tech including cloud computing/AI, gaming, edge processing, metaverse, and autonomous & electric vehicles,” Bank of America’s Vivek Arya said.
Applied Materials (NASDAQ:AMAT), which accounts for 4.13% of the SOXQ roster, also made the cut as an attractive chip name.
That “is another stock that showed up on CNBC’s screen, with a PEG ratio of 1. The stock has pulled back 12.2% this year. Citi last week named Applied Materials a stock to buy on the dip,” according to CNBC.
Other SOXQ member firms highlighted by CNBC include Micron Technology (NASDAQ:MU), Lam Research (NASDAQ:LRCX), Microchip Technology (NASDAQ:MCHP), and Monolithic Power Systems (NASDAQ:MPWR). That quartet combines for almost 14% of SOXQ’s weight.
SOXQ holds 30 stocks with a weighted average market cap of almost $198 billion.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.