Semiconductor Stocks To Buy And Watch Ahead Of Q4 Earnings Season

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Finding the best semiconductor stocks to buy involves understanding the health of the markets that purchase chips for their products.




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When smartphone sales rise or fall, chipmakers are impacted. The same goes for sales of personal computers, servers for data centers, and other large end markets for microprocessors.

Semiconductor stocks turned south in late 2018 amid slowing demand, especially for memory chips. In 2019, global semiconductor sales dropped 11.9% to $418.3 billion, research firm Gartner said.

Chip stocks rose in 2020 as the semiconductor industry emerged from a cyclical downturn, despite the Covid-19 pandemic.

The semiconductor market is a key sector to watch because chips play a vital role in new technologies. Computer chips are the enabling technology behind a host of emerging trends, from the Internet of Things and 5G wireless to self-driving cars and artificial intelligence.

Top Semiconductor Stocks On IBD Watchlists

The IBD 50 list of top-performing growth stocks currently includes 10 semiconductor industry names. A month ago, the list had six chip stocks.

IBD’s highly selective Leaderboard list includes three chip industry stocks.

The MarketSmith Growth 250 list now has 26 semiconductor stocks. Three months ago, it had just seven. The Growth 250 is a curated list of high-potential stocks poised for possible breakouts.

Remember, when looking for the best chip stocks to buy, watchlists like the IBD 50 and MarketSmith Growth 250 are just a starting point. Before you buy, make sure the stocks are forming proper bases and hitting appropriate buy points under the right market conditions.

Monolithic Power Systems

Monolithic Power Systems (MPWR) ranks first out of 31 semiconductor stocks in IBD’s fabless chipmaker industry group. MPWR stock sports a best-possible IBD Composite Rating of 99, according to the IBD Stock Checkup tool. The Composite Rating scores a stock’s key growth metrics against all other stocks regardless of industry group.

The Kirkland, Wash.-based company has posted four consecutive quarters of accelerating sales and earnings growth.

On Dec. 23, MPWR stock broke out of a third-stage cup base at a buy point of 358.79, according to IBD MarketSmith charts. Since then, it has traded just in or out of the 5% chase zone.

Monolithic sells energy-efficient semiconductor power systems used in industrial applications, telecom infrastructure, cloud computing, automotive and consumer applications.

Taiwan Semiconductor Manufacturing

Top chip foundry Taiwan Semiconductor Manufacturing (TSM) is leading the race to make semiconductors at ever smaller circuit widths.

Its contract manufacturing operations have lifted many fabless semiconductor companies including AMD (AMD) and Nvidia (NVDA).

Taiwan Semiconductor ranks second out of 32 semiconductor stocks in IBD’s chipmaker industry group. It has an IBD Composite Rating of 97 out of 99. Macom Technology Solutions (MTSI) is first in the group with a 98 Composite Rating.

On Dec. 1, Taiwan Semiconductor stock broke out of a rare ascending base at a buy point of 102.54, according to MarketSmith charts. It is now extended beyond the buy zone of its breakout.

Qorvo

Wireless chipmaker Qorvo (QRVO) is one of several semiconductor stocks benefiting from the transition to 5G cellular technology.

Qorvo stock has formed an ascending base with a buy point of 171, according to MarketSmith charts. That buy point is 10 cents above its recent high of 170.90, reached on Dec. 8.

Qorvo stock has been surging since the Greensboro, N.C.-based company delivered better-than-expected fiscal second-quarter results on Nov. 4.

QRVO stock ranks third in IBD’s Electronics-Semiconductor Manufacturing industry group. It has an IBD Composite Rating of 96.

SiTime

Fabless chipmaker SiTime (SITM) has been on a tear lately. It is trading just below its all-time high of 118.60, reached on Dec. 17.

SiTime stock went public in November 2019 at $13 a share.

The Santa Clara, Calif.-based company specializes in making micro-electromechanical systems, known as MEMS, for timing devices in a host of electronics.

SiTime stock ranks No. 14 in IBD’s Electronics-Semiconductor Fabless industry group. It has a Composite Rating of 88.

Applied Materials

Semiconductor equipment maker Applied Materials (AMAT) is seen benefiting from rising chip-gear spending in 2021. Investment bank Needham rates AMAT stock as its “top pick” in the semiconductor-equipment segment for the year ahead.

The Santa Clara, Calif.-based company is tied for second place among 34 semiconductor stocks in IBD’s chip-gear industry group. Applied Materials stock has an IBD Composite Rating of 98.

On Nov. 5, AMAT stock broke out of an 11-week consolidation period at a buy point of 70, according to MarketSmith charts. It currently trades in the 20%-to-25% profit-taking zone of its breakout.

However, AMAT stock could be forming a new base.

Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.

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