Stocks to Buy - 3 Small Cap Semiconductor Standouts (CREE, VLTR, ISSI)


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Despite the market crashing around our ears in the last few weeks, the seeds for the next market surge are already being planted in the fertile intellectual soil of Silicon Valley. Simple trading strategies are often the best for your portfolio -- and right now as retirement investors look for a safe place to put their money right now, they need only to observe which areas of the broader economy are seeing growth.

Semiconductor stocks, from large cap tech blue chips to small cap stocks with growth potential, are really hitting their stride. These investments are going to provide tremendous opportunity for investors, and some of my favorite semiconductor stocks include Cree ( CREE ), Integrated Silicon Solution ( ISSI ) and Volterra Semiconductor Corp ( VLTR ) just to name a few. (On the other hand, these 10 horrible picks are some of the worst stocks to sell right now.)

There are many reasons to be bullish on semiconductor stocks right now, and these three small cap stocks in particular. This week, about 5,000 independent developers (those who dream up new "killer aps" for PCs and hand-held devices) are sharing their best ideas (and coy disinformation) at the Apple Worldwide Developers Conference in San Francisco. Industry analyst Richard Doherty said, "more new millionaires walk out of that conference than any other." 

The latest "hot" device, of course, is the Apple ( AAPL )  iPhone 4, unveiled this week by Steve Jobs. But there's more to technological growth than the iPhone, iPad, iPod, or iAnything else. Chip sales are the industry bellwether, and the widely-watched Gartner group has recently revised its 2010 forecast for worldwide chip sales substantially higher to $290 billion, a 27% increased from 2009's total of $228 billion. Gartner had previously projected a 2010 rise of just 19.9%. And the news keeps getting better almost every day.

In his June 8 morning briefing this week, Ed Yardeni reported these startling facts:

  • Worldwide semiconductor sales soared 67.1% from their February 2009 bottom, led by an 89.7% surge in New World sales (a.k.a. Asia Pacific). In April, these sales accounted for 54.6% of total chip sales, double their share in 2000. Old World sales (US, Europe, & Japan) were also up 47.6% from a March 2009 low.
  • Semiconductor bookings are nearly six times above the level of a year ago, while shipments have more than tripled over the same period. April's 1.13 book-to-bill ratio is just below six-year highs, a level previously associated with the beginnings of booms in the tech industry.
  • Information Technology moved up to fifth in the 2010 sector derby from 8/10 in April but its price index is down 7.7% ytd, trailing the S&P 500's 5.8% decline. …Forward earnings surged 22.6% in 2010 to a record high, and is up 15 straight months. Tech is one of just three sectors at a record high in May.

In addition, worldwide PC shipments this year are on track to rise 22% from a year ago, to 377 million units, and PC spending will rise 12% to $245 billion, according to Gartner. In addition, Microsoft ( MSFT ) says it has sold over 100 million licenses for Windows 7 since that new software came out last October, making it the company's most successful operating system launch. So…it's "lock and load" time for tech stocks!

Related Article: Simple trading strategies - 5 easy ways to find great stocks

All of these developments mean bigger demand for semiconductors, since these chips and electronic components are the engines for all personal electronics and computers. The semiconductor sector is going to see a surge thanks to the sale of high tech goods this summer. Three stocks to watch to benefit from this trend are  Cree ( CREE ), Integrated Silicon Solution ( ISSI ) and Volterra Semiconductor Corp ( VLTR ).

Cree Inc. ( CREE ) is an innovative electronics company that is literally lighting up Wall Street with its cutting-edge light-emitting diodes -- or LEDs for short. These next-generation lights are more efficient and more versatile, making the old incandescent lights of my youth another piece of outdated technology like the eight-track, VCRs and floppy computer disks.

Integrated Silicon Solution ( ISSI ) makes specialized read-only memory chips and other devices, including voice-recording chips. These chips are used in cars, computers, instrumentation and telecommunications devices and are integral to their operations.

Volterra Semiconductor Corp. ( VLTR ) designs and markets low-voltage power supply chips, including switching regulators for communications and networking applications.

Related Article: Check out 5 Hot Penny Stock Picks for June

As of this writing, Louis Navellier was recommending all three of these semiconductor stock picks in his investment newsletters to paid subscribers.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Stocks
More Headlines for: AAPL , CREE , ISSI , MSFT , VLTR

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Louis Navellier

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