J.P. Morgan’s Top Chip Stocks to Buy on the Strong Start to 2014

By Trey Thoelcke Published Mar 3, 9:05AM EST

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The Semiconductor Industry Association (SIA) recently announced total chip sales for January, and it was a very pleasant surprise for Wall Street. The organization announced January monthly sales of $25.1 billion, or a month-over-month decrease of 9.6%, above the average January decrease of 15.3%, due to strength in microprocessor and flash memory sales. With a strong start to the year, the top chip companies could be poised for an outstanding 2014.

In a new research report, the chip analysts at J.P. Morgan were impressed with the strong showing and remain very positive on well-managed companies with leverage and upside to current consensus estimates. They maintained their overall semiconductor forecast of 8% year-over-year revenue growth in 2014 as business conditions improve. Investors looking for a strong technology addition to their portfolio may want to think chips.

Here are the five top names to buy at J.P. Morgan that are seen to directly benefit from the early 2014 sales success.

Altera Corp. (NASDAQ: ALTR) makes the top five at J.P. Morgan and is a stock to buy now. The company designs, manufactures and sells programmable logic devices (PLDs), HardCopy application-specific integrated circuit devices, power system-on-chip devices, pre-defined design building blocks and proprietary development software. Investors are paid a 1.7% dividend. The J.P. Morgan price objective for the stock is $38. The Thomson/First Call estimate is posted at $38.22. Altera closed Friday at $36.31.

Analog Devices Inc. (NASDAQ: ADI) is another one of five top chip sector pick at J.P. Morgan. Innovation, performance and excellence are the cultural pillars on which Analog Devices has built one of the longest standing, highest growth companies within the technology sector. Acknowledged industrywide as the world leader in data conversion and signal conditioning technology, Analog Devices serves more than 60,000 customers, representing virtually all types of electronic equipment. J.P. Morgan thinks the stock is a perfect growth and income play as investors are paid a 2.9% dividend. The J.P. Morgan price target is at $55. The consensus price objective is $53.16. Analog Devices closed Friday at $50.82.

Intel Corp. (NASDAQ: INTC) has been caught in a ratings tug-of-war on Wall Street, but J.P. Morgan is one firm that believes the Silicon Valley giant is poised to breakout of its multiyear slump. A new commitment to smartphone and mobile applications, combined with a possible resurgence of PC growth this year, may make Intel one of the best large cap value stocks to buy. Investors are paid a very solid 3.6% dividend. The J.P. Morgan price target is $30, and the consensus is much lower at $25.19. Intel closed Friday at $24.76.

Texas Instruments Inc. (NASDAQ: TXN) is another old school name to make the list of stocks to buy at J.P. Morgan. The company recently announced it is shipping in volume production the industry’s smallest, most efficient wireless power receiver to support both the Wireless Power Consortium’s (WPC) Qi 1.1 and Power Matters Alliance (PMA) specifications. Investors are paid a very manageable 2.7% dividend. The J.P. Morgan price target is $50, and the consensus target is at $43.25. Texas Instruments closed Friday at $44.96.

Xilinx Inc. (NASDAQ: XLNX) rounds out the top five names to buy at J.P. Morgan. The company’s programmable devices comprise integrated circuits (ICs) in the form of PLDs, such as programmable System on Chips, and three-dimensional ICs; software design tools to program the PLDs; targeted reference designs; printed circuit boards; and intellectual property (IP), which consists of Xilinx and various third-party verification and IP cores. Investors receive a 2.2% dividend. The J.P. Morgan target is $49, while the consensus is placed at $51.17. Xilinx closed Friday at $52.20.

The top stocks to buy at J.P. Morgan all have substantial growth areas in their business lines. They each also all pay investors a reasonably solid dividend. While current events will bring some volatility in to the markets, investors with some dry powder may find excellent entry points on these names if they are patient.

About the Author Trey Thoelcke →

Trey has been an editor and author at 24/7 Wall St. for more than a decade, where he has published thousands of articles analyzing corporate earnings, dividend stocks, short interest, insider buying, private equity, and market trends. His comprehensive coverage spans the full spectrum of financial markets, from blue-chip stalwarts to emerging growth companies.

Beyond 24/7 Wall St., Trey has created and edited financial content for Benzinga and AOL's BloggingStocks, contributing additional hundreds of articles to the investment community. He previously oversaw the 24/7 Climate Insights site, managing editorial operations and content strategy, and currently oversees and creates content for My Investing News.

Trey's editorial expertise extends across multiple publishing environments. He served as production editor at Dearborn Financial Publishing and development editor at Kaplan, where he helped shape financial education materials. Earlier in his career, he worked as a writer-producer at SVE. His freelance editing portfolio includes work for prestigious clients such as Sage Publications, Rand McNally, the Institute for Supply Management, the American Library Association, Eggplant Literary Productions, and Spiegel.

Outside of financial journalism, Trey writes fiction and has been an active member of the writing community for years, overseeing a long-running critique group and moderating workshop sessions at regional conventions. He lives with his family in an old house in the Midwest.