According to the “High Quality” screener, one of several predefined screens under the All-in-One Screener, four semiconductor companies with strong growth potential are Taiwan Semiconductor Manufacturing Co. Ltd. (TSM, Financial), Texas Instruments Inc. (TXN, Financial), Skyworks Solutions Inc. (SWKS, Financial) and Intel Corp. (INTC, Financial).
Dow trades higher on improving U.S.-China trade talks
On Thursday, the Dow Jones Industrial Average closed at 26,384.63, up approximately 166.5 points from Wednesday’s close of 26,218.13 on improving trade negotiations between the U.S. and China.
CNBC columnist Fred Imbert said the Wall Street Journal reported President Trump expects to announce the date of a trade summit with Chinese President Xi Jinping later on Thursday.
“Bottoming narrative” in China propels semiconductor industry
CNBC's “Squawk on the Street” anchors said strong economic data from China supports the “bull narrative” regarding earnings growth stability despite poor economic data from the U.S. and Europe. Columnist Huiling Tan said on Monday that manufacturing in China “expanded unexpectedly in March at its fastest pace in eight months”: the Caixin Manufacturing purchasing manager’s index level of 50.8 outperformed the analyst estimate of 49.9. Such market data boosted gains among semiconductor companies like Nvidia Corp. (NVDA, Financial), Lam Research Corp. (LRCX, Financial) and major David Tepper (Trades, Portfolio) holding Micron Technology Inc. (MU, Financial).
Taiwan Semiconductor
Taiwan Semiconductor engages in the manufacturing, packaging and computer-aided designing of integrated circuits and other semiconductor devices. GuruFocus ranks the company’s financial strength and profitability 8 out of 10 on several positive signs, which include expanding profit margins, a robust Altman Z-score of 11.69 and a return on equity that outperforms 88% of global competitors. Additionally, Taiwan Semiconductor’s business predictability ranks five stars out of five on strong and consistent revenue and earnings growth over the past 10 years.
Oakmark Global Fund manager David Herro (Trades, Portfolio) said in his fourth-quarter shareholder letter that Taiwan Semiconductor “controls over 50% of the semiconductor foundry market,” a market with high barriers to entry due to “significant capital requirements, in-depth technological expertise and a customer-centric business model.” Herro added such characteristics, in addition to strong free cash flow, increases shareholder value potential.
Gurus with large holdings in Taiwan Semiconductor include Ken Fisher (Trades, Portfolio), First Eagle Investment (Trades, Portfolio) and Sarah Ketterer (Trades, Portfolio).
Texas Instruments
Dallas-based Texas Instruments designs and manufactures semiconductors that it sells to electronic designers and manufacturers. The company generates approximately 95% of its revenue from semiconductors and the remainder from its well-known calculators like the TI-84 and TI-89.
GuruFocus ranks Texas Instruments’ profitability 9 out of 10 on several positive indicators, which include operating margins that have increased approximately 12.10% per year over the past five years and are outperforming 99% of global semiconductor companies. Additionally, the company’s return on assets is near a 10-year high of 32.09% and outperforms 97% of global competitors.
Even though the stock trades near a 10-year high, gurus riding Texas Instruments’ strong profitability include PRIMECAP Management (Trades, Portfolio) and former U.S. Vice President Al Gore (Trades, Portfolio), who is the current manager of Generation Investment Management LLP.
Skyworks Solutions
Woburn, Massachusetts-based Skyworks Solutions manufactures semiconductors for handsets used to enable wireless connectivity. The company’s products include power amplifiers, filters and integrated front-end modules.
GuruFocus ranks the company’s financial strength 10 out of 10 on several strong indicators, which include no long-term debt and a robust Altman Z-score of 15.97. Other positive signs, which include expanding profit margins and a five-star business predictability rank, contribute to a GuruFocus profitability rank of 9.
Intel
Dow component Intel closed at $55.92 per share, up approximately 0.79% from the previous close. The Santa Clara, California-based company designs and manufactures a wide variety of integrated digital technology products for industries like computing and communications.
GuruFocus ranks Intel’s profitability 9 out of 10 on several positive indicators, which include consistent revenue growth and a strong Piotroski F-score of 8. Additionally, Intel’s operating margin has increased approximately 5% per year over the past five years and is outperforming 95% of global competitors.
See also
GuruFocus launched a new version of the All-in-One Screener, one of our most-popular Premium features. Other key features for Premium members include the Buffett-Munger Screener and the Aggregated Portfolio of Gurus.
Disclosure: No positions.
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