The chip rally this year has been very strong, the question as we head into summer is can it continue? The semiconductor index, or SOX, is up an impressive 18.3% year to date, and has only closed down in five of the past 25 trading sessions. In the past, the summer months have not been that good to the chip sector. Over the past five years, during the months of May to August, the SOX has, on average, has been down 4.8%.
In a new report from RBC, the analysts admit that many investors and traders are gun-shy and have their fingers on the proverbial triggers or sell buttons when earnings or other data hit the tape. They still are very positive on five top stocks to own that they think have a minimum of 20% upside from here. Investors looking for solid upside potential from stocks that are not runaway momentum names, may want to review the top names to buy in China that we recently covered.
All five of the stocks are rated Overweight at RBC.
Avago Technologies Ltd. (NASDAQ: AVGO) not only gets a huge chunk of its business from Apple, but it is a big provider in the cloud/hyperscale data center and networking segment. The company supplies Cisco Systems with application-specific integrated circuits for a variety of high-end gear. It also indirectly sells into Scientific Atlanta by supplying integrated circuits for disk drives that end up in DVRs. Investors are paid a 1.6% dividend. The RBC price target for this top name is $87. The Thomson/First Call consensus price target is $79.80. Avago closed Wednesday at $71.64, so a move to the RBC target would be a 22% gain.
Freescale Semiconductor Ltd. (NYSE: FSL) is a global leader in embedded processing solutions, providing industry leading products that are advancing the automotive, consumer, industrial and networking markets — from microprocessors and microcontrollers to sensors, analog integrated circuits and connectivity. Some 45% of the company’s business is generated through the automotive industry, making the connected car a huge earnings contributor. The RBC price objective for the stock is $30, and the consensus target is at $27.67. The stock closed Wednesday at $23.38. Trading to the RBC target would be a 23% gain.