Technology investors used to say "When Intel Intel sneezes, the semiconductor sector catches a cold." While it is still true that many chip stocks still more or less follow Intel's lead, there are now so many niche uses for integrated circuits (which is the more modern name for what used to be called semiconductors) that Intel's value as a bellwether has become questionable. Intel's performance is closely tied to the personal computer market while other circuit makers serve largely separate niches from cell phones to game consoles to cameras and other devices.
Nonetheless, in an otherwise very healthy market, Intel has been sneezing quite a lot recently, with its stock down about 8% since the beginning of 2012 compared to a 30% gain for the S&P 500. As a result, many of the other chip stocks have been suffering as well.
We don't know enough about the tech sector to predict when the malaise in the chip makers will fade (and even those who claim such expertise rarely get it right). What we do know is that when the sector comes back into favor, these stocks can perform very well.
Each of the ten stocks discussed below has a targeted niche (with some overlap). But they all have a few things in common: their stocks are below $10 and well off their highs of recent years; they have reasonable barriers-to-entry to their niche; and they have solid balance sheets and liquidity. I believe these characteristics give these stocks strong rebound potential.
While we are on the subject of chip stocks, I still like Cypress Semiconductor, which I recommended last January. Until recently it was trading above $10 so I left it off the list but I am still attracted to its growth potential and its 3.7% dividend yield.
Atmel Atmel is a leading producer of microcontrollers, and it is targeting touch controllers/sensors for use in mobile devices. The firm's maXTouch product enables touch screen applications while its XSense line improves screen displays. If you believe that better displays coupled with touch screens represent the wave of the future, then Atmel has appeal.
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