By Todd Rosenbluth, CFRA
CFRA remains bullish on many semiconductor securities, which helps support our view on a variety of related ETFs.
Angelo Zino, CFRA technology equity analyst, sees orders improving in the second half of 2017 and in 2018 as next-generation product launches support higher wireless demand. While he expects secular declines to persist in the PC space, he sees an aging infrastructure supporting more modest declines going forward.
Zino thinks the communications and consumer end markets will remain healthy despite periods of lumpiness, as carrier comments in China suggest to him an improved spending outlook for 2018 as well as continued growth in smartphones. CFRA also sees continued growing demand for NAND flash memory equipment, primarily reflecting the rising trend of greater memory content per smartphone and the ongoing adoption for solid-state devices.
In addition, technology investments related to 3D NAND should provide a boost to spending demand conditions. CFRA has STARS rankings on 65 US semiconductor and semiconductor equipment stocks, with 26 of them Strong Buy or Buy recommendations.
iShares PHLX Semiconductor ETF (SOXX) has $1.3 billion in assets. Exposure is primarily to semiconductor stocks (85% of assets), such as NVIDIA (NVDA) and Broadcom (AVGO) while semiconductor equipment stocks (15%), like Lam Research (LRCX), are much less represented. In addition to US stocks, the ETF has exposure to companies based in Singapore and Taiwan. The ETF trades on average 400,000 shares daily, with a tight bid/ask spread and it has a 0.48% net expense ratio.