Even with recent pullbacks, Nvidia (NVDA) and some other well-known semiconductor equities rank among this year’s best-performing large-cap stocks. That status implies it’s potentially difficult to find attractively valued ETF names in this group.
Investors shouldn’t be hasty in assuming that the entirety of the semiconductor equity space remains richly valued. In fact, owing to the recent pullback endured by the industry, some stocks in this arena are now attractively valued. Fortunately, market participants don’t need to pick individual names in search of chip stock value because the VanEck Semiconductor ETF (SMH) is home to several of the chip equities that currently sport more favorable valuations than were seen earlier this year.
Yes, Nvidia accounts for more than 20% of the SMH roster. This means that stock goes a long way toward charting the course for the exchange traded fund. However, the good news is some of the ETF’s other holdings can provide discounted support for the fund.
Trio of SMH’s ETF Holdings Look Interesting
The $20.27 billion SMH holds 25 stocks, including Nvidia, but there are some other valuation opportunities in the SMH portfolio. That includes Asml Holding (ASML), the ETF’s sixth-largest holding at a weight of 4.32%.
“Semiconductor equipment and materials firm ASML has lost 28.35% over the past three months and gained 13.96% over the past year. The large-growth stock has a wide economic moat. ASML is trading at a 24% discount to its fair value estimate of $990, with a high uncertainty rating,” noted Morningstar analyst Bella Albrecht.
Micron Technology (MU) has taken a beaten in recent weeks, but that member firm of the ETF has also drifted into undervalued territory, indicating it could be poised for some near-term upside. It accounts for 3.39% of the SMH portfolio. In fact, Morningstar calls Mircon a value stock – a designation that isn’t frequent in the chip space.
“Semiconductor company Micron is down 33.53% over the past three months and up 23.28% over the past year. The stock’s price is 21% below its fair value estimate of $110, with a high uncertainty rating,” added Albrecht.
Some of SMH’s smaller holdings are also taking on the look of a credible value plays. That includes mid-cap name On Semiconductor (ON), which like Micron, has been taken to task by traders in recent months, sliding 31.73% year-to-date. However, Morningstar noted that like Asml and Micron, ON is increasingly appealing on valuation.
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