13 Small Publicly Traded Semiconductor Companies on the Verge of Big Gains
In this article, we present 13 small publicly traded semiconductor companies. To skip the detailed analysis of the semiconductor market, you can go directly to 5 Small Publicly Traded Semiconductor Companies.
Semiconductors are at the core of modern life. They are the brains with which modern electronics think and execute the functions they were created to accomplish. These tiny pieces of magic have driven advances in all sectors of modern life, from computing, communications, and transportation to military systems.
In 2020, the importance of electronics cranked up significantly. This was a difficult period when the world was struggling through a severe pandemic, the coronavirus disease. With infections traveling fast across borders, governments across the globe imposed movement restrictions that affected the semiconductor industry in two main ways.
First, the restrictions collapsed supply chains, leading to a chip shortage. As of mid to late 2021, consumers could not purchase essential and other electronic items. For example, the BBC reported that big vehicle manufacturers like Volvo, Toyota, and Ford had to temporarily suspend manufacturing in 2021 because they could not acquire the chips necessary for powering the electronics in their cars. Interestingly, even companies one couldn't imagine could be affected by a chip shortage suffered significantly. For example, CSSI International, an American company that makes dog-grooming machines, could not fulfill orders because of the shortage.
Secondly, the restrictions precipitated higher demand for electronics. As more people were stuck in their houses, many due to work-from-home (WFH) policies, they needed more electronics to keep them company. Others needed computers and attendant devices to make it possible to work away from the office. In fact, a Pew Research survey released in September 2021 revealed that 90% of Americans relied on the internet to survive the pandemic. But for the tech to become a lifeline, people had to acquire electronics, whose production depends on the chips.
While the pandemic increased chip sales, it is important to note that the market was initially shrinking. The United States started targeting China with sanctions in 2018, with President Trump arguing that they were necessary to placate US businesses. The sanctions introduced bottlenecks that plunged chip sales between 2018 and 2019. For example, Statista data shows that the semiconductor market size fell 12% in 2019 from the previous year's $468.78 billion. However, sales increased in the aftermath of the pandemic, growing the global semiconductor market size to $440.39 billion in 2020, just under $30 billion below the 2018 historic peak. The positive growth extended into 2021 ($555.89 billion market size) and 2022 ($580.13 billion market size).
Moreover, the semiconductor market has the energy to add another $200 billion to its current value. According to Precedence Research, the market will expand at a 6.6% CAGR between 2022 and 2030 to reach $772.03 billion. Considering that Precedence Research undervalues the market's 2022 size (relative to Statista's valuation), it is possible that the value could cross the $1 trillion mark by 2030.
What does this mean? Much can be deduced from the insights, but the most obvious is that companies operating in the space have huge potential to grow revenue. In other words, investors have the chance to grow their portfolios by investing in semiconductor companies.
Unfortunately, many investors tend to select industry leaders when angling for such opportunities. Granted, big semiconductor companies like Intel Corporation (NASDAQ:INTC), Qualcomm Inc. (NASDAQ:QCOM), Broadcom, Inc. (NASDAQ:AVGO), and others have an edge in terms of incumbency and market share.
However, those who equate such qualities with the earning potential for investors are often wrong for several reasons. The main reason small publicly traded companies – in any industry, not just the semiconductor market – offer a better earning potential is that the stocks can transform into massive capital gains due to share price explosion. Large-cap companies have a narrow space for such moves. In addition, largest semiconductor companies are often ready victims in geopolitical contests, such as the ongoing US-China trade war. The war has affected giants like Intel and TSMC, leading to a substantial loss of value. In contrast, small companies often operate in niches rarely touched by sanctions and counter-sanctions, making the ideal haven to protect one's investment in the semiconductor industry.
We started by defining a small publicly traded company in the semiconductor industry, a stock from a publicly traded semiconductor company with a total market capitalization ranging from $150 million to $2 billion. The other name for these companies, which we adopted here, is small-cap semiconductor stocks. Then, we drew a list of all small-cap semiconductor stocks trading in the United States. Lastly, we picked the 13 most popular ones based on hedge fund holdings as hedge funds usually invest in small-cap stocks because of their upside potential. In other words, we chose the 13 most popular small-cap semiconductor stocks among US hedge funds.
Small Publicly Traded Semiconductor Companies
13. MagnaChip Semiconductor Corporation (NYSE:MX)
Market capitalization as of March 3: $431.65 million
Number of hedge fund holders: 24
MagnaChip Semiconductor Corporation (NYSE:MX) is a global designer and manufacturer of analog and mixed-signal semiconductor products. The company provides various products, including power management ICs, display drivers, audio codecs, and sensors for consumer, industrial, and automotive applications. It is headquartered in Seoul, South Korea, and has offices and facilities in Asia, the Americas, and Europe. MagnaChip Semiconductor Corporation (NYSE:MX)'s share price has been gyrating between $8 and $20 over the past year. The stock is up 1.91% year-to-date, although the bears are stronger in all the other timeframes, including 5-day, 1-month, 6-month, and 1-year. It is possible that the market is apprehensive, given the company's underperforming financials in the full year 2022. Also, MagnaChip Semiconductor Corporation (NYSE:MX) operates in a highly cyclical industry, and general downturns often affect small-cap companies more.
Nevertheless, MagnaChip Semiconductor Corporation (NYSE:MX) boasts substantial competitive advantages, including a wide range of products, strong R&D capabilities, a global presence, and enviable manufacturing expertise. MagnaChip Semiconductor Corporation (NYSE:MX) currently holds a ‘Moderate Buy’ consensus rating, determined by an average of one buy rating and one hold rating, with no sell ratings.
According to Insider Monkey’s data, 24 hedge funds were long MagnaChip Semiconductor Corporation (NYSE:MX) at the end of the fourth quarter of 2022, compared to 31 funds in the last quarter. Rubric Capital Management is the most significant position holder in the company, with 1.95 million shares.
MagnaChip Semiconductor Corporation (NYSE:MX) is one of the significant semiconductor stocks, along with Intel Corporation (NASDAQ:INTC), Qualcomm Inc. (NASDAQ:QCOM), and Broadcom, Inc. (NASDAQ:AVGO).
Here is what Altron Capital Management said about Magnachip Semiconductor Corporation (NYSE:MX) in its fourth quarter 2022 investor letter:
“MagnaChip Semiconductor Corp. (NYSE:MX). While the previous buyout offer from Wise Road Capital did not go through as many expected, the company is still in talks with other potential buyers. Furthermore, the company announced a USD 75 million share buyback, which represents a significant percentage of the company’s shares. While we do not generally enter positions with the anticipation of a buyout, it is the case that a MagnaChip acquisition will be the most likely outcome.”
12. SMART Global Holdings Inc. (NASDAQ:SGH)
Market capitalization as of March 3: $850.97 million
Number of hedge fund holders: 17
SMART Global Holdings Inc. (NASDAQ:SGH) operates in three major tech industry sectors, and memory solutions is amongst them. The company provides random access memory modules for various computing devices, including notebooks, desktops, smartphones, and servers. Its significance to the global semiconductor industry has seen SMART Global Holdings Inc. (NASDAQ:SGH)'s share price climb 12.76% year-to-date and 157.55% since the 2017 IPO. Formerly known as Saleen Holdings, Inc., the Milpitas, California-based company also has strong financials. Its price-to-earnings ratio is 17.1729x (TTM) and 15.01x for the full year 2022.
SMART Global Holdings Inc. (NASDAQ:SGH) has an unassailable competitive advantage regarding the product range. It offers a wide range of memory and storage solutions for various applications, including consumer electronics, enterprise storage, and industrial applications. This allows the company to serve a diverse customer base and capitalize on opportunities in different market segments. Additionally, SMART Global Holdings Inc. (NASDAQ:SGH) has entered strategic partnerships with industry leaders, including Samsung and Micron, allowing it to access the latest technologies and stay at the forefront of innovation in the industry. Based on 5 buy ratings, 0 hold ratings, and 0 sell ratings, SMART Global Holdings Inc. (NASDAQ:SGH) has a consensus rating of ‘Strong Buy.’
According to Insider Monkey’s data, SMART Global Holdings Inc. (NASDAQ:SGH) was part of 17 hedge fund portfolios at the end of Q4 2022, compared to 18 in the earlier quarter. Yiheng Capital is the company’s biggest stakeholder, with 2.95 million shares.
Here is what Meridian Funds said about SMART Global Holdings, Inc. (NASDAQ:SGH) in its Q2 2022 investor letter:
“SMART Global Holdings, Inc. (NASDAQ:SGH) is a diversified technology company with leading market positions in memory controllers, LEDs, high-performance computing (HPC), and the internet of things (IoT). The company hit a rough patch in 2019 and early 2020 when earnings declined due to a combination of volatility in its memory business caused by weakness in Brazil and inventory corrections, growth investments the company had made in new products ahead of revenue, and order delays in its HPC business. While none of these developments is particularly unusual, it is uncommon for all three to turn negative at the same time. Our investment thesis was that the company’s impressive new management team could not only smooth out some of the volatility in the business but also drive growth through superior capital allocation and organic investment. We also believed that strong secular trends were in place for memory controllers, driven by the increased importance of memory for computing speeds and increased memory content in devices, and for HPC, driven by artificial intelligence and machine learning. Smart Global’s stock traded lower during the quarter due to macro concerns and weakness in its Brazil segment, which is highly exposed to a slowdown in consumer demand for mobile devices and PCs. We took advantage of the downturn and increased our position. We are comfortable with the volatility of the Brazil business as, over cycles, this segment is a solid cash generator that helps fund investments in the strong secular growth prospects for memory controllers and HPC.”
11. nLIGHT, Inc. (NASDAQ:LASR)
Market capitalization as of March 3: $595.21 million
Number of hedge fund holders: 13
nLIGHT, Inc. (NASDAQ:LASR) is a global provider of high-power semiconductor and fiber lasers used in industrial, microfabrication, aerospace, defense, and medical applications. Shares in LASR were mixed in the past six months, fluctuating around $11.00. However, the stock seems to have finally found its footing and is climbing slowly but surely; it has gained 10.60% to $11.58 since the year began. nLIGHT, Inc. (NASDAQ:LASR) is also up 2.57% in the past five days. The stock's fluctuation in the short-term, especially the past six months, is attributed to the company's shifting business model, where it is moving production out of China.
Despite the weak financials, the market has faith in nLIGHT, Inc. (NASDAQ:LASR)’s competitive advantage, including technology leadership (over 300 patents), a diversified product portfolio, and a vertically integrated manufacturing process. That is why analysts recommend the stock as a "Moderate Buy” which is based on 2 buy ratings, 2 hold ratings, and 0 sell ratings.
Hedge funds are loading up on nLIGHT, Inc. (NASDAQ:LASR), as Insider Monkey’s data shows that 13 hedge funds held a stake in the company as of the end of the fourth quarter of 2022, compared to 12 funds at the end of the previous quarter. Rima Senvest Management is the leading shareholder of nLIGHT, Inc. (NASDAQ:LASR) with 958,131 shares.
10. Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL)
Market capitalization as of March 3: $734.27 million
Number of hedge fund holders: 11
Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL) is a semiconductor company that designs, produces, and markets power semiconductors worldwide. Alpha and Omega enjoys strong financials; in the full year 2022, the company had an 18.37% year-on-year revenue growth, 679.76% year-on-year net profit growth, and 654.01% net EPS growth. Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL)'s valuation is also favorable, with a 2.07x price-to-earnings ratio and 4.60x EV/EBITDA in the full year 2022. The strong financials and other factors have seen the stock price rally 63.03% in the past five years. However, the stock's short-term performance has been adversely affected by geopolitical tensions and supply chain disruptions in the aftermath of the coronavirus pandemic.
After the fiscal Q2 results, B. Riley analyst Craig Ellis maintained a Neutral rating on Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL)'s shares while reducing his price target from $36 to $34. Ellis noted that the weakness in the PC market and inventory correction observed in Q2 had extended to other end markets in Q3, leading to near-term difficulties for Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL).
At the end of Q4 2022, 11 hedge funds owned a stake in Alpha and Omega Semiconductor Limited (NASDAQ: AOSL), down from 15 in the preceding quarter. AQR Capital Management held a significant stake in Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL) at the end of the fourth quarter of 2022.
9. NVE Corporation (NASDAQ:NVEC)
Market capitalization as of March 3: $378.29 million
Number of hedge fund holders: 11
NVE Corporation (NASDAQ:NVEC) is a technology company that designs, develops, and sells high-performance sensors and isolators. While the broad semiconductor market appears to be straining under several pressure points (primarily geopolitical tensions), NVEC's stock is soaring. It is up 8.19% in the past month, 62.38% in the past six months, and 19.29% year-to-date. The stock is also rallying from a long-term perspective, having gained 3.85% in the past five years. Various factors underly the stock's bullishness, more so robust financials. For example, the company expects a 26.31% y-o-y revenue growth when it releases FY2022 results on March 31. Also, the expected full year 2022 price-to-earnings ratio is 18.16x; NVE Corporation (NASDAQ:NVEC) registered a 21.50x three-year PE average.
NVE Corporation (NASDAQ:NVEC) expects robust fundamentals because of several competitive strengths, including leadership in spintronic technology, industry-leading custom design services, a strong intellectual property portfolio, an experienced R&D team, and a global customer base.
According to Insider Monkey’s database, 11 hedge funds were long NVE Corporation (NASDAQ:NVEC) as of Q4 2022. The total value of their holdings was $53.24 million. Citadel Investment Group is the leading shareholder of NVE Corporation (NASDAQ:NVEC), with a stake worth over $1.38 million.
8. Himax Technologies, Inc. (NASDAQ:HIMX)
Market capitalization as of March 3: $1.36 billion
Number of hedge fund holders: 11
Himax Technologies, Inc. (NASDAQ:HIMX) is a Tainan City, Taiwan-based semiconductor company. It creates and distributes timing controllers and integrated circuits (ICs) critical in display imaging processing technologies used in televisions, digital cameras, monitors, laptops, mobile phones, car navigation, tablets, and many other consumer electronic devices that display content. Himax Technologies, Inc. (NASDAQ:HIMX) stock is up 25.44% year-to-date, an impressive run that has seen the market capitalization grow to $1.36 billion. Based on the most recent financials and stock performance, Himax Technologies' price-to-earnings ratio (TTM) is 5.73x. In addition, the company's price-to-earnings (PE) for the fiscal year (FY) 2022 was 9.16x, and 25.45x for the three-year average for the period ended December 31, 2022.
In addition, the number of hedge funds tracked by Insider Monkey having stakes in Himax Technologies, Inc. (NASDAQ:HIMX) grew to 11 in Q4 from 10 in the preceding quarter. These stakes hold a consolidated value of $61.52 million. As of December 31, Yiheng Capital has over 5.1 million shares in Himax Technologies, Inc. (NASDAQ:HIMX) and is the largest investor.
7. CEVA, Inc. (NASDAQ:CEVA)
Market capitalization as of March 3: $758.80 million
Number of hedge fund holders: 8
CEVA, Inc. (NASDAQ:CEVA) is an American semiconductor company. Although the company does not operate directly as a semiconductor company, it provides critical technology used in the industry. In addition, it licenses smart sensing and wireless connectivity technologies to major semiconductor companies in the US and abroad. CEVA, Inc. (NASDAQ:CEVA)'s share price has been on a roll lately, growing by 27.24% year-to-date and 15.67% over the past six months. Besides favorable technicals, CEVA's fundamentals are solid. The company's gross margin for the full year 2022 was 79.91% and a three-year average of 85.16%. CEVA is also a high-value stock, with a 698.89x three-year average price-to-earnings ratio.
CEVA, Inc. (NASDAQ:CEVA) has a strong IP portfolio, covering a wide range of signal processing technologies such as digital signal processors (DSPs), image processors, and artificial intelligence (AI) accelerators. This enables the company to provide its customers with a comprehensive suite of IP solutions for their specific application needs. Following the Q4 results, Barclays analyst Tavy Rosner increased the firm's price target on Ceva from $35 to $41 and maintained an Overweight rating on the shares as of February 17.
Hedge fund sentiment reflects the positive trajectory of CEVA, Inc. (NASDAQ:CEVA), held by 8 hedge funds during the fourth quarter of 2022. In comparison, 7 hedge funds held stakes in CEVA, Inc. (NASDAQ:CEVA) in Q3 2022. Rima Senvest Management is CEVA, Inc. (NASDAQ:CEVA)’s largest shareholder, with shares worth 1.03 million shares.
6. Valens Semiconductor Ltd. (NYSE:VLN)
Market capitalization as of March 3: $ 553.22 million
Number of hedge fund holders: 8
Valens Semiconductor Ltd. (NYSE:VLN) provides semiconductor products for the development of high-speed connectivity solutions for the audio-video and automotive industries. Their products enable the transmission of high-quality audio and video data over long distances with minimal latency and signal loss. Valens Semiconductor Ltd. (NYSE:VLN)’s financials were strong in the full year 2022; revenue grew by 24.20% y-o-y, and gross profit also added 16.33% y-o-y. However, the company's operating expenses increased abnormally by 17.17%, leading to a 35.14% y-o-y decline in net profit. The decline was caused by the company expanding its operations into providing semiconductor products for new car models.
Overall, 8 hedge funds monitored by Insider Monkey were bullish on Valens Semiconductor Ltd. (NYSE:VLN) in the fourth quarter. The stakes of these funds are valued at $5.09 million. LMR Partners was the company’s prominent stakeholder in Q4.
Intel Corporation (NASDAQ:INTC), Qualcomm Inc. (NASDAQ:QCOM), and Broadcom, Inc. (NASDAQ:AVGO) are some of the notable semiconductor stocks, in addition to Valens Semiconductor Ltd. (NYSE:VLN).
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Disclosure: None. 13 Small Publicly Traded Semiconductor Companies is originally published on Insider Monkey.