We have said it before, but this deserves to be repeated. The semiconductor space has soared for over a year, and some of the valuations have become very stretched. The PHLX Semiconductor Sector Index (SOX) was up a stunning 35% in 2016 and has continued to run higher in 2017. The question for investors looking to add to positions or buy stocks and initiate is simple: Is anything still affordable?

Will Stein, the outstanding chip analyst at SunTrust Robinson Humphrey, thinks so. He also thinks the sector has the legs to go higher, as we are just in the second quarter of the massive year-over-year growth spurt for the stocks, and overall fundamentals remain positive.

With that in mind though, Stein and his team remain “selectively optimistic,” and that is probably the best stance to take at this juncture. Four top companies remain his focus stocks, and all are rated Buy.

Broadcom

This stock has been on a roll over the past 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.

Top analysts are also very positive on the company benefiting on the ramp to both the Tomahawk and the Tomahawk 2 and routing silicon Jericho and Qumran. Facebook is expected to use the company’s Tomahawk switching chip in the Voyager project. The Kalia, Qumran-AX & Qumran-UX families of products are complementary to Broadcom’s high-capacity StrataDNX Jericho and Qumran-MX SoCs. Together they provide the industry’s most comprehensive end-to-end portfolio of switching solutions across the carrier, data center and enterprise markets.

Shareholders receive a 1.86% dividend. The SunTrust price target for the stock is $252, and the Wall Street consensus target is 244.19. The shares closed most recently at $219.63.

Analog Devices

This stock also has been on fire and looks to push even higher. 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 cited 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 3.1 times at close, well below management’s 3.8 times 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.

Investors are paid a 2.16% dividend. SunTrust has a $99 price target. The consensus target is $88.60, and shares closed Wednesday at $83.48.

MobilEye

This company continues to be one of the leading beneficiaries of the autonomous driving revolution. Mobileye N.V. (NYSE: MBLY) develops computer vision and machine learning, data analysis and localization and mapping for ADAS and autonomous driving technologies, primarily in Israel. It operates through two segments, Original Equipment Manufacturing and Aftermarket.

The company offers Roadbook, a localized drivable paths and visual landmarks using its proprietary REM technology through crowd sourcing, and proprietary software algorithms and EyeQ chips that perform detailed interpretations of the visual field to anticipate possible collisions with other vehicles, pedestrians, cyclists, animals, debris and other obstacles.

The company’s products also detect roadway markings, such as lanes, road boundaries, barriers and related items, and they identify and read traffic signs, directional signs and traffic lights. In addition, the company provides enhanced cruise control, pre-lighting of brake lights and Bluetooth connectivity, as well as related smartphone application.

Last year Mobileye announced four contract awards for semi-autonomous driving starting in 2018 and announced its intention to have a fully autonomous highway driving vehicle in serial production in cooperation with BMW and Intel in 2021.

The $63 SunTrust price target compares with the consensus target of $56.48. The stock closed Wednesday at $46.64.

Microsemi

This company could benefit from continued industrial demand and it is also a top pick at Deutsche Bank. 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 in a recent report:

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 most recently at $52.18.

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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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