It might be hard to imagine, given the Nasdaq Composite's
tumble over the past two days (a slide that Intel (NASDAQ:
) is contributing to today), but there still might be some upside
for semiconductor stocks in 2013.
Growth in communications spending is one catalyst that could
bolster chip stocks this year, according to a new research note
from S&P Capital IQ.
"In 2013, we believe the industry is poised to grow about 4%,
led by a pickup in communications spending, continued growth in
consumer electronics, an uptick in automotive, and GDP-like
growth in military and industrial end markets," S&P Capital
IQ said in the note. "We believe the industry is in good shape to
at least grow in line with global GDP, likely reversing much of
the trends seen last year, such as some chip customers' lean
inventories, low utilization, and cost-cutting."
tracking semiconductor shares have incurred significant damage
this week, some of the marquee funds tracking this sub-sector of
the technology space have been decent performers on a
year-to-date basis. The Market Vectors Semiconductor ETF (NYSE:
), which allocates 18 percent of its weight to Intel and over 14
percent to Taiwan Semiconductor (NYSE:
), is 2.7 percent this year when factoring in Thursday's
The SPDR S&P Semiconductor ETF (NYSE:
), which takes more of an equal-weight approach to the sector and
is noticeably less dependent on the likes of Intel and Texas
) to drive its returns, is higher by 1 about 1.8 percent after
accounting for today's drop of almost three percent.
However, the chip ETF S&P Capital IQ highlights in its
note is the iShares PHLX SOX Semiconductor Sector Index Fund
). SOXX, which has almost $222 million in assets under management
and an annual expense ratio of 0.48 percent, earns a Marketweight
rating from S&P.
Home 31 stocks, SOXX devotes over 61 percent of its weight to
its top-10 holdings, a roster that includes Applied Materials
), Texas Instruments, Taiwan Semiconductor, Broadcom (NASDAQ:
) and Intel.
the ETF's lineup shows ample exposure
to the communications and consumer electronics themes S&P is
"We think communications end market spending will bounce back
in 2013. Wireless and wireline communications account for
approximately 32% of chip sales, and we expect this end market to
pick up on pent-up demand," according to the research firm.
"Consumer electronics semiconductors, which market researchers
see making up about 17% of industry sales, consist of digital TV,
videogame consoles and handhelds, set-top boxes, portable media
players, digital versatile disk (
) players and recorders, and digital cameras. We believe major
drivers of consumer spending include devices with improved
graphics, and increased connectivity availability and speeds. We
see consumer electronics growing 5% in 2013."
SOXX has lost almost two percent in the past five trading
days, so a buying opportunity may be close, although valuation
fans may want to wait for SOXX to decline further. The ETF has a
P/E ratio of 26.31,
according to iShares data
. By comparison the PowerShares QQQ (NASDAQ:
has a P/E of less than 15
, implying SOXX is richly valued relative to the Nasdaq 100.
For more on ETFs, click
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