You hear the expression “follow the money” all the time, and it seems to apply to everything from politicians to criminals to Las Vegas. The reason everybody uses the cliché is that in most cases it proves to be true. You follow the money either from the source or to the final destination, and you get answers.
The UBS technology team that covers chips did just that. In a new research report, they detail how they performed an analysis of net equity trading flows from Bloomberg data for their coverage universe of chips, semiconductor capital equipment and alternative energy stocks. This simplistic analysis showed a net inflow of new money into chips for more than a year, with much of it driven by large block trades that most likely come from institutional funds.
We screened UBS’s top semiconductor stocks to buy for those with the biggest upside to their target price.
Intel Corp. (NASDAQ: INTC) is a buy-rated name from UBS that has turned the corner after years of sideways movement and disappointing progress for investors. A new commitment to smartphone and mobile applications, combined with the resurgence of PC growth this year, has made Intel one of the best large cap value stocks to buy. Intel trades at 15 times forward earnings, more than in recent years, but still a reasonable multiple for investors looking for growth.
Intel shareholders are paid a solid 2.6% dividend. UBS has a $37.50 price target on the stock, while the Thomson/First Call consensus target is $34.18. The stock closed Tuesday at $34.82 a share.
Micron Technology Inc. (NASDAQ: MU) continues to confound Wall Street with a string of impressive earnings reports. The company, which is a leader in DRAM chip sales, is one of the top Wall Street technology picks. It looks to benefit from Apple Watch and iPhone memory chip sales to Apple. The Apple Watch memory is expected to be the smaller 512 megabit DRAM and 4 gigabit and 8 gigabit NAND variety, which could include other vendors, it still means more sales. The iPhone 6 has already proven to be a blockbuster product that should bode well for Micron.
The UBS price target for the stock is posted at $38. The consensus target is $40.17. Shares of the stock closed trading Tuesday at $34.26.
NVIDIA Corp. (NASDAQ: NVDA) remains Silicon Valley’s top graphics chip company, and many on Wall Street see the stock having the ability to soar over the next year. The company has been able to use its ability to leverage past investments, with a more controlled spending structure ahead on unified, which enables strong cash flow that is allowing a focus on capital return, which is currently estimated to be $1 billion next year. Despite a strong move this year, the UBS team thinks the best could still be ahead.
Investors receive a 1.85% dividend. The UBS price target is $20, and may go higher at some point. The consensus target is also $20. NVIDIA closed Tuesday at $18.45.
Qualcomm Inc. (NASDAQ: QCOM) is a top technology stock that resides on the UBS QGARP list, and it was also added to the Dividend Ruler list in the summer. Despite all the positives, not the least of which is the release of the new Apple iPhone 6, the company is under investigation for unfair business practices by the Chinese government, an investigation some on Wall Street see leading to changes in Qualcomm’s business practices. The headline risk may be just the ticket for investors looking to add this quality company at a lower price.
Investors in Qualcomm are paid a 2.25% dividend. The UBS price target is posted at $86, and the consensus target is $83.86. The stock closed trading Tuesday at $74.77.
SanDisk Corp. (NASDAQ: SNDK) is another top stock that is rated Buy at UBS. SanDisk’s quality, state-of-the-art solutions are at the heart of many of the world’s largest data centers, as well as embedded in advanced smartphones, tablets and PCs. The company is considered one of the top memory names for investors to own now on Wall Street.
Investors are paid a 1.3% dividend. The UBS price target is $120, and the consensus figure is at $113.38. The stock closed Tuesday at $97.95.
The UBS team is really not going after any long shots here, and neither are the top institutional funds. The firm is focused on the top stocks in the sector, and their advice to investors makes good sense. Stick with the leaders in each subsector and the chances for success are multiplied. And of course, follow the money.