Oppenheimer’s List of Semiconductor Stocks to Buy (BRCM, SMTC, SWKS, MXIM, LLTC, AAPL, MSCC)

We have reported at great length how the world of semiconductors has changed drastically in the past five years. A business that was once dominated by personal computers, laptops and servers is now is overshadowed by the explosive growth of smartphones and tablets. With a host of new product offerings expected in the upcoming second quarter, it may be time for investors to overweight some of the dominant semiconductor names.

In a report issued today, the semiconductor analysts at Oppenheimer noted a surprising change in the industry attitude from the same time last year. They attribute this change to a general improvement in orders. Several companies the firm spoke with are tracking toward the high-end of their first quarter guidance. The “1Q as trough” view is now nearly unanimous. Channel inventory appears normal/low outside of the smartphone and tablet segment.

If companies are tracking near the high-end of their guidance and deliver strong second-quarter earnings, this could have a big effect on the stock price. The team at Oppenheimer presented a list of their top semiconductor names with a product line that is skewed to the smartphone/tablet world. Those stocks are:

Broadcom Corp. (NASDAQ: BRCM) makes chips for wired and wireless communications that offer voice, video, data and multimedia connectivity in the home, office and mobile environments. The stock closed yesterday at $33.64 and has a Thomson/First Call price target of $40.

Semtech Corp. (NASDAQ: SMTC) has been on fire recently, after beating estimates and raising guidance. The stock closed yesterday at $30.72 and has a Wall St. consensus estimate of $35.

Highly shorted Maxim Integrated Products Inc. (NASDAQ: MXIM) may provide tremendous opportunity, with an earnings beat in the second quarter. Closing yesterday at $31.80, it has a consensus target of $35.

Skyworks Solutions Inc. (NASDAQ: SWKS) is also a top name to buy at Oppenheimer. Many view this one as too highly dependent on Apple Inc. (NASDAQ: AAPL). An increase in Apple product sales could have a meaningful contribution to their earnings. The consensus price target is $30. That could be a big move from the $21.16 close yesterday.

The Oppenheimer team also tips their research hat to Linear Technology Corp. (NASDAQ: LLTC), which has a consensus price target of $37.70, and Microsemi Corp. (NASDAQ: MSCC) as secondary names that could do well in an uncertain macro environment.

At the end of the day, it is important for investors to carve out a portion of their portfolio dollars for companies that are exposed to the smartphone and tablet explosion. It is very possible that we are still in the early innings of a product cycle that will expand and grow for years. Changing and improving technology almost assures that possibility.

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