The market had a rough reaction to the failure of the Republican health care bill, and we could be ripe for a correction. With that in mind, it also might give investors a shot at buying some of the top semiconductor stocks that have run so hard over the past year. With the market for chips expanding through industrial, automotive, Internet of Things and scores of other uses, the market continues to grow, and the top companies should continue to do outstanding.

In a new research report, the semiconductor analysts at SunTrust Robinson Humphrey acknowledge that the segment has some of the signs of topping, and they do not disagree with that. However, they do feel that there are some extenuating reasons why this cycle could have some nuances not seen in the past.

In addition to highlighting four top stocks to buy in the report, the SunTrust Robinson Humphrey team also lists five reasons to remain positive on selected stocks.

1. Structural benefits from consolidation within the industry
2. Low cycle depth and early duration
3. A positive macro environment for the overall sector
4. Inventories at most companies that have been kept very lean
5. Constructive stock price action

Analog Devices

This stock has broken out and has acted terrific over the past year. Analog Devices Inc. (NASDAQ: ADI) is a leader in the design, manufacture and marketing of analog, mixed-signal and digital signal processing integrated circuits for use in industrial, automotive, consumer and communication markets worldwide. It offers signal processing products that convert, condition and process real-world phenomena, such as temperature, pressure, sound, light, speed and motion, into electrical signals.

The company recently introduced a highly integrated polyphase analog front end with power quality analysis designed to help extend the health and life of industrial equipment while saving developers significant time and cost over custom solutions. Achieving extremely accurate, high-performance power quality monitoring typically requires customized development, which can be expensive and time-consuming.

The analysts noted in a recent report:

We believe Analog Devices will offer investors several positive surprises as we progress through 2017. We see several areas of upside: First, we believe the Linear Technology Corporation (NASDAQ: LLTC) acquisition will close earlier than expected (April). Second, we expect net leverage will be approximately 3.1x at close, well below management’s 3.8x guidance. Third, we believe management will ultimately exceed its $150 million of targeted synergies. Fourth and finally, we believe the upward earnings-per-share revision will be constructive for the stock.

Analog Devices investors receive a 2.22% dividend. The SunTrust price target for the stock is 99. The Wall Street consensus target is $90.19. The stock closed Monday at $81.10.

Avnet

The analysts see this company as the sleeper in the bunch, as they think it is ignored by investors and Wall Street. Avnet Inc. (NYSE: AVT) is a global distributor of electronic components (semiconductors, passives, connectors, and so on) and IT hardware (servers, storage, networking, software and services). The company connects over 300 electronic component and IT hardware original equipment manufacturers with upward of 100,000 customers.

The analysts noted:

The new CEO recently unveiled a strategy to create value including a renewed focus on (a) acquisitions and (b) more profitable revenue. Although we dislike negative earnings revisions resulting from divestitures like the company’s sale of its Technology Solutions business, the company’s model will look much improved by calendar year 2018.

The $53 SunTrust price objective compares with the consensus target of $47.94. The stock closed Monday at $43.78.

Broadcom

This stock has stayed on a roll this year and is expected to trade even higher. Broadcom Ltd. (NASDAQ: AVGO) is a leading designer, developer and global supplier of a broad range of analog and digital semiconductor connectivity solutions. Its extensive product portfolio serves four primary end markets: wired infrastructure, wireless communications, enterprise storage and industrial and other.

Applications for the company’s products in these end markets include data center networking, home connectivity, broadband access, telecommunications equipment, smartphones and base stations, data center servers and storage, factory automation, power generation and alternative energy systems and displays.

The company produces radio frequency (RF) front-end for LTE-enabled Apple products. Wall Street estimates that the company does 15% of its total business with Apple. Top Wall Street analysts like the leadership in the mobile, data center and broadband markets, and especially in the RF arena. Many on Wall Street see a cyclical rebound in industrial and communications demand.

The analyst said:

Broadcom continues to exemplify our industrialization of semis theme: we expect acquirers to outperform as they consolidate the cost base in the still-too-fragmented semi industry. Despite recently doubling its dividend and raising its dividend payout ratio target to 50%, we believe the company’s cash flow can continue to fund meaningful acquisitions. We estimate, based on significant cash flow growth, that within one year Broadcom will be able to do another significant ($15 billion+) acquisition that would take net leverage to only 2.0x.

Shareholders receive a 1.87% dividend. SunTrust has a $252 price target, and the consensus target is $244.19. Shares closed Monday at $218.68.

Microsemi

This company could benefit from continued industrial demand. Microsemi Corp. (NASDAQ: MSCC) offers a comprehensive portfolio of semiconductor and system solutions for communications, defense and security, aerospace and industrial markets.

Products include high-performance and radiation-hardened analog mixed-signal integrated circuits, power management products; timing and synchronization devices and precise time solutions, setting the world’s standard for time; voice processing devices; RF solutions; security technologies and scalable anti-tamper products; Ethernet solutions; Power-over-Ethernet ICs and midspans.

While it hasn’t actually announced a deal, the company is said to still be running a sale process after receiving takeover interest from Skyworks Solutions, according to people familiar with the matter. Microsemi hired Bank of Montreal last year to run a broader auction after Skyworks offered to buy the company, the people said, asking not to be named because the negotiations are private. The process is in the early stages, no deal is imminent and a transaction may not occur.

The analysts noted:

We envision three ways for investors to profit in the company: (1) if the company executes reasonably well towards its 6-8% organic sales growth target, it should deliver revenue and earnings-per-share upside, lower financial leverage, and should be rewarded with a higher P/E multiple; (2) if the company pursues another acquisition after achieving 3.0x leverage (we estimate potentially in the first half of 2017) it will not likely achieve P/E multiple expansion, but will benefit from higher EPS estimates; (3) if the company is acquired, which management has openly discussed.

The SunTrust price target is $68, and the consensus target is $63.91. The shares closed Monday at $53.29.

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While the huge upside is probably gone, all these companies offer aggressive investors some good potential for gains. It may be smart to buy partial positions here and see if we don’t get a pullback in the shares.

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