Despite my apparent reputation for being a heathen chartist who desecrates the holy parchment upon which financial statements are carefully written using calligraphy, from time to time I do indeed acknowledge “the fundamentals.” At the end of the day, though, the market is the ultimate arbiter. Declaring that Mr. Market is blatantly disregarding the thesis that you arrived at after hours of work can be an extraordinarily expensive ego trip to embark on, should you choose to put your money where your intrinsic value conclusion is.
With that said, in a bull market we see period rotations in and out of sectors. The semiconductors, and specifically semiconductor equipment makers, saw a spectacular run in late 2010 and even earlier this year. Over the past few months, however, many of them have taken a well-deserved rest, with some pulling back in a near straight line as trading sheep took whatever latecomer profits they had and headed over to the silver futures’ pits.
The weekly charts that I am going to present below are just a few examples of firms in the semiconductor space with impressive fundamentals and/or growth. Despite sporting lackluster daily charts, in a bull market it is important to keep a big picture perspective with the weeklies. In other words, they remain in overarching bull runs, and the presumption is that significant pullbacks will turn out to have been excellent buying opportunities. I am aware that semis are usually not the sector choice in the late spring and summer months, but if you have patience and are looking for multi-month or even multi-quarter holds, I suggest taking a look in this space. As always, I recommend sound risk management in the form of sensible stop-losses.
Before I get to the charts, click on the photo below to see The PPT analysis of semiconductor equipment makes, sorted by strength of fundamentals.