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Global Semiconductor Sales Rise in October: 4 Stocks to Buy

Trade war fears have definitely dented investors' confidence but chip stocks are not as susceptible to trade war as industrials.

Global semiconductor sales reached $41.8 billion in October, according to the Semiconductor Industry Association (SIA). The trade war has been taking a toll on chipmakers and other technology stocks. However, despite recurrent tensions, semiconductor sales continue to rise.

Moreover, a trade truce between the United States and China following the White House's declaration of a 90-day moratorium on raising tariffs on Chinese goods sent chipmaker stocks higher earlier this week. Chip stocks have been largely responsible for the long-running market rally. And with global semiconductor sales increasing once again in October, it makes semiconductor stocks must haves for your portfolio.

Global Semiconductor Sales Rise   

On Dec 3, the Semiconductor Industry Association announced that global sales of semiconductors reached $41.8 billion in October, reflecting a 12.7% and 1% year-over-year and monthly increase, respectively. Global semiconductor sales came in at $41.4 billion in September. Regionally, year-over-year sales jumped 23.3% in China, followed by 14.1% in the Americas and 7% in Europe.

Moreover, World Semiconductor Trade Statistics (WSTS) industry forecast has been revised upward. The SIA endorsed the WSTS Autumn 2018 global report, which projects worldwide sales of semiconductors to reach $477.9 billion in 2018. This will also mark the industry’s highest-ever annual sales, increasing 15.9% from the 2017 figure of $412.2 billion. Also, the annual global semiconductor market is projected to grow 2.6% in 2019.

Trade War Fears Might Ease

The trade dispute between the United States and China has been weighing on markets for a while now. This has resulted in chipmaker stocks suffering time and again. However, a trade truce between the United States and China, following the White House's declaration of a 90-day moratorium on raising tariffs on Chinese imports, saw chipmaker stocks bouncing back earlier this week.

Over the weekend, the White House issued a statement saying that the United States would hold back on increasing tariffs on Chinese imports for 90 days, as both the countries start working on a possible resolution to the trade dispute. This gave investors the much-needed confidence, thereby driving chip stocks.

Our Choices

The United States is the largest semiconductor manufacturing country, while China is its biggest market. Trade war fears have definitely dented investors’ confidence but chip stocks are not as susceptible to trade war as industrials. Also, China’s limitations in building its own technology industry might restrict it from acting against U.S.-based players.

Given the robust demand for semiconductors and an increase in global semiconductor sales once again in October, the recent fears may be overblown. This is why picking semiconductor stocks still looks like a smart option. However, picking winning stocks may be difficult. We have narrowed down our search to the following stocks based on a good Zacks Rank and other relevant metrics.

Cree, Inc. CREE is a market-leading innovator and manufacturer of semiconductors that enhance the value of solid-state lighting, power and communications products by significantly increasing their energy performance and efficiency. 

Cree sports a Zacks Rank #1 (Strong Buy). The company has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved 32.7% over the past 60 days.

Intel Corporation INTC develops advanced integrated digital technology products, primarily integrated circuits, for industries such as computing and communications. 

The company has expected earnings growth of 30.9% for the current year. The Zacks Consensus Estimate for the current year has improved 9.7% over the past 60 days. The stock sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Xilinx, Inc. XLNX, a leading provider of All Programmable FPGAs, SoCs, MPSoCs and 3D ICs, has introduced the architecture for a new Extensible Processing Platform that will deliver unrivaled levels of system performance, flexibility and integration to developers of a wide variety of embedded systems. 

Xilinx carries a Zacks Rank #2 (Buy). The company has expected earnings growth of 16.3% for the current year. The Zacks Consensus Estimate for the current year has improved 10% over the past 60 days.

Vishay Intertechnology, Inc. VSH is one of the world's largest manufacturers of discrete semiconductors (diodes, MOSFETs, and infrared optoelectronics) and passive electronic components (resistors, inductors and capacitors). 

Vishay Intertechnology has a Zacks Rank #2. The company has expected earnings growth of 43.4% for the current year. The Zacks Consensus Estimate for the current year has improved 2.5% over the past 60 days.

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Intel Corporation (INTC) : Free Stock Analysis Report
 
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