Although technology stocks have been broadly mixed so far in
2013, one sector has shown some promise as of late; semiconductors.
This key corner of the tech world has rebounded nicely, easily
beating out the market over the last month.
The reasons for this outperformance are varied, but investors
can definitely focus in on earnings as one of the top explanations
for the surge. Profit results for many of the top companies came in
above expectations-along with decent outlooks-causing many traders
to bid up these companies in the process (see Three Tech ETFs Still Going Strong ).
In fact, a few of the biggest names in the space, Intel
( INTC ) ,
Applied Materials ( AMAT ) , and
Taiwan Semiconductor ( TSM ) have all
gained double digits in the trailing one month time frame. And,
smaller more specialized semiconductor firms, such as in the solar
industry with First Solar ( FSLR ) have
also done quite well, suggesting a broad based rally for the
Can It Continue?
The best part about these gains is that they could definitely
continue based on some solid trends in the space. Some analysts are
expecting global semiconductor sales to continue to rise-even with
a decline in PC shipments-as more are sold in emerging technology
applications like tablets and smartphones instead.
Thanks to this perception and the rosier outlook for technology
in general, many analysts have begun to bump up their estimates for
the space, leading to strong Zacks Industry Ranks across the
semiconductor market (read New Leadership in the Tech ETF Space? ).
In fact, the Zacks Industry Rank for many segments in the space
is quite favorable, include a top 50% level for all the semi
conductor industries, a top 25% Rank for the semi-general space, and 5 industries that
have a top 20 (out of 261) Ranking as well.
So clearly, at least based on this estimates picture, the trend
could continue in the semiconductor space. But since the rally has
been so broad based, an ETF approach might be a better play at this
time, in order to diversify away some risk and play the solid
trends impacting the entirety of the market (also see 3 Apple-Proof ETFs ).
In this vein, there are actually a few ETF choices out there to
target the market, any of which could be great picks for investors
including SMH , XSD , and SOXX . While they are similar, there
actually a few key differences that investors should be aware of
between the group, some of which we have briefly highlighted in the
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