Wednesday, January 5, 2011

National Semi (NYSE:NSM), Intel (Nasdaq:INTC), AMD (NYSE:AMD), Broadcom (Nasdaq:BRCM), Marvell (Nasdaq:MRVL) May be Defensive in Short Term

In the short term FBR Capital says tehy are nervous over the vertical price action even though the sector looks somewhat healthy. Companies they see on the defensive are National Semi (NYSE:NSM), Intel (Nasdaq:INTC), AMD (NYSE:AMD), Broadcom (Nasdaq:BRCM) and Marvell (Nasdaq:MRVL).

FBR said, "We remain constructive on the chip sector for 2011 and think that semiconductor stocks can appreciate higher over the course of the year, given (1) robust end demand for smartphones, tablets, infrastructure equipment, and industrial/automotive applications; (2) higher chip content per device in handsets, automobiles, and others; (3) still-reasonable channel inventories; (4) still-limited capacity growth, and (5) reasonably high earnings power. That said, chip stocks have had a powerful move higher since Labor Day and, thus, could be subject to profit taking, a pullback, or, at the very least, some digesting to start the year. While we continue to believe 2010–2011 is the sector's first-ever "soft landing," we do see some revenue- and EPS-related "ship ahead" risks still for chip firms, particularly in the industrial and communications/networking sectors, and expect some misses from chip firms in these sectors in 1H11, though the magnitude of these resets should be modest. Sector valuations are now appropriate but not downright attractive anymore, given the group's move higher. That said, the one risk to protecting profits is investors' recent actions to reallocate funds from bonds to equities, potentially making any action to protect profits too early. Stocks that could be defensive in the near term include National Semi (NYSE:NSM), Intel (Nasdaq:INTC), AMD (NYSE:AMD), Broadcom (Nasdaq:BRCM), and Marvell (Nasdaq:MRVL). Stocks that may have moved upwards too far too fast, near term, include Linear (Nasdaq:LLTC), Silicon Labs (Nasdaq:SLAB), Atmel (Nasdaq:ATML) and, possibly, Fairchild (NYSE:FCS). For 2011 in aggregate, we still see material upside in Outperform-rated stocks such as QUALCOMM (Nasdaq:QCOM), BRCM, Atheros (Nasdaq:ATHR), LSI Corp (NYSE:LSI), NSM, On Semi (Nasdaq:ONNN), FCS, and Microsemi (Nasdaq:MSCC)."

National Semiconductor closed Tuesday at $13.85, down $0.04, or 0.29 percent. Intel closed at $21.15, gaining $0.30, or 1.44 percent. AMD closed at $8.77, up $0.30, or 3.54 percent. Broadcom closed at $43.19, losing $1.04, or 2.36 percent. Marvell closed at $18.12, down $0.42, or 2.26 percent.

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