Semiconductor stocks have been the subject of unpredictable volatility so far this year, but the underlying business of this industry is growing—and should continue that trend in 2018 and beyond. Throughout the chip-making space, companies have successfully adapted to the changing needs of the consumer, including an increased demand for small, high-powered chips that enable “Internet of Things” (IoT) devices.
For those that don’t know, the Internet of Things is the growing world of interconnected household and industrial devices. Everyday products and machines can now be embedded with sensor technology to process data or interact with other electronic devices.
For example, consumer-level IoT products include things like Amazon’s (AMZN) Echo “smart speaker,” wearable motion and activity tracking products, and advanced in-car technology. On the commercial side of the IoT market, industrial manufacturers have begun implementing sensors into machines to track performance and efficiency.
(Also Read: How to Invest in the "Internet of Things")
As demand for the microchips that power these IoT devices continues to grow, semiconductor manufacturers with a focus on IoT products will continue to benefit. And 2018 promises to be another marquee year for these suppliers, with the number of connected devices worldwide set to continue its rapid growth.
With that said, we’ve found three already-strong stocks that are looking to benefit even more from further IoT growth in 2018:
1. Vishay Intertechnology, Inc. (VSH)
Vishay Intertechnology is a global manufacturer and supplier of discrete semiconductors. The company has a broad portfolio of unique passive and active solutions that are tailored to the “things” being controlled in the IoT. Vishay markets its portfolio to manufacturers of everything from biometric monitoring systems to fitbands and smart appliances.
VSH is currently a Zacks Rank #1 (Strong Buy). The stock is solid growth option, with earnings and revenue expected to improve by 29.4% and 15.5%, respectively this year. But VSH is also reasonably priced, and the stock’s P/E of 13.9 and PEG of 2.1 show that investors are getting a great bargain on its current outlook. Shares have moved about 6.5% higher within the past month and could also be an interesting momentum play as they continue to test 52-week highs.
2. Intel Corporation (INTC)
Intel is one of the world’s largest semiconductor companies, and it has proven to be a leader in the Internet of Things chip business. Intel’s core IoT businesses cater to the automotive, retail, industrial, and smart video markets. But the firm also believes in the wide-ranging power of IoT technology and stands ready to influence the industry, wherever it may go.
INTC is holding a Zacks Rank #1 (Strong Buy), as well as “B” grades in the Value and Growth categories of our Style Scores system. Shares are trading at an attractive 12.9x forward earnings, which is a nice discount to its industry average. Plus, earnings and cash flow growth are both at +15% rates, and Intel pays out a solid dividend which delivers a yield of 2.3% right now.
3. Marvell Technology Group Ltd. (MRVL)
Marvell Technology is a leading designer, developer and supplier of mixed-signal and digital signal processing integrated circuits. The company’s “EZ-Connect” platform is used by a variety of global customers in the home automation, wearables, automotive, and industrial industries. MRVL is currently a Zacks Rank #2 (Buy).
Marvell’s earnings estimates are trending upward, it has not missed estimates in about two years, and the company is notching cash flow growth of nearly 80%. Meanwhile, shares are looking cheap at just 15.4x forward earnings, and a PEG ratio of 1.4 implies investors are getting a decent price for its EPS growth outlook.
The Internet of Things is one of the most exciting emerging tech markets in the world. And while these specific products are interesting, the real moneymakers in these situations are the companies that are building the tech that powers these products.
The best way for investors to cash in on this growing trend is to identify companies that are not only investing in the Internet of Things, but are also displaying solid fundamentals and impressive Zacks metrics.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Marvell Technology Group Ltd. (MRVL) : Free Stock Analysis Report
Intel Corporation (INTC) : Free Stock Analysis Report
Vishay Intertechnology, Inc. (VSH) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research