PHLX Semiconductor Index has posted fabulous returns so far in 2020, lifting more 40% since the last trading day of 2019. Sadly, many well-known names topped out with broad benchmarks in September and are working off overbought technical conditions through trading ranges or lower prices. As an alternative, let’s look at a smaller group that’s hitting new highs as we wrap up the month of November, well-positioned for even higher prices between now into year’s end.
A number of 2020 sector leaders have taken market share from Intel Corp. (INTC), which has fallen from grace after a series of self-inflicted wounds. The Dow component has lost 21% so far this year, in stark contrast with the broad-based SOX index, piling up misfires and delays driven by weak management and poor execution. The old school behemoth has lost significant business to more nimble rivals and could descend into oblivion in 2021.
Micron Technology Inc. (MU) makes memory chips. The stock has booked a respectable 19% return this year but the rally off the first quarter low tells an even more bullish tale, doubling in price and lifting into a critical test at May 2018’s high in the mid-60s. A breakout could presage outstanding 2021 upside because the advance will face little resistance into the all-time high in the 90s, posted at the height of the Internet bubble in 2000.
Applied Materials Inc. (AMAT) makes semiconductor equipment for mainstream and leading-edge fabrication and is benefiting from the developing technology war with China. The stock has risen 36% so far in 2020 and just completed a massive cup and handle breakout above the 2000 high in the mid-50s. In addition, it’s gained more than 40% since the end of October, capitulating on strong Q4 2020 top and bottom line results.
On Semiconductor Corp. (ON) makes chips for power generation, electric vehicles, cloud computing, and industrial production. It’s lesser known than other chip stocks in this review but has also benefited from Intel’s misfortunes, with accelerating sales surprising many analysts. The stock has just broken out above the March 2018 peak in the mid-20s and is trading at an all-time high. It’s also more than tripled in price off the March 2020 low at 8.17.
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Disclosure: the author held no positions in aforementioned securities at the time of publication.