Five Semiconductor Investments to Buy at Reduced Prices Amid Putin’s Predatory Policies

Paul Dykewicz

Cypress Semiconductor

Five semiconductor investments to buy at reduced prices offer products that not even the predatory policies of Russia’s President Vladimir Putin should be able to torpedo.

The five semiconductor investments to buy after recent pullbacks in their share prices should be protected from financial distress due to strong demand from growth industries such as electric vehicles, consumer electronics and data servers. However, supply chain problems due to COVID-19 outbreaks, shipping challenges, rising costs and Putin’s deployment of 150,000 troops to attack neighboring Ukraine have posed recent challenges.

The premier semiconductor manufacturer is Taiwan Semiconductor Manufacturing Company Ltd. (NYSE: TSM), of Hsinchu, Taiwan, said Bob Carlson, a pension fund chairman who also leads the Retirement Watch investment newsletter. The biggest risk, outside of normal business and market issues, is that China might be encouraged by Russia’s invasion of Ukraine and take military action against Taiwan, he added.

Chinese Threats May Affect Five Semiconductor Investments to Buy at Reduced Prices

Taiwan’s Minister of Foreign Affairs Joseph Wu said on Jan. 13 that military threats voiced against it from China was not just rhetoric. China’s leaders in Beijing have beefed up their country’s military and openly discussed “invading” Taiwan. He mentioned that Chinese military aircraft in 2021 had flown more than 900 sorties — a French word for military missions — that passed over Taiwanese territory.

The Chinese Communist Party (CCP) aired a video in its native language during July 2021 that warned Japan of a nuclear response and “full-scale war” if the island nation interferes with the world’s most populous country’s plans to annex Taiwan. The video, aired on a channel that is approved by the CCP, named Japan as the one exception to China’s policy to not use nuclear weapons against non-nuclear powers.

In response to the growing threat, Wu said Taiwan has acquired new weaponry and is preparing for possible military action from China.

Taiwan Semiconductor Manufacturer Shows Success Formula Rivals Seek to Emulate

“TSM is rapidly building facilities around the globe, including in the United States,” Carlson said. 

Taiwan Semiconductor is a marketplace leader and typically a top holding in industry funds, Carlson commented. Company officials describe it unabashedly as the “world’s largest and best semiconductor foundry.”

Bob Carlson, head of Retirement Watch, speaks with columnist Paul Dykewicz.

The company has developed its own semiconductor design ecosystem and collaborated with its customers and partners to offer innovations. Roughly 85% of worldwide semiconductor start-up product prototypes were enabled by TSM.

In addition, Taiwan Semiconductor reported that it has built 12,302 different products with 291 unique process technologies to serve hundreds of customers with more than 13 million 12-inch-equivalent wafers in 2021. The company claims to have 26% of semiconductor market share.

Five Semiconductor Investments to Buy at Reduced Prices in Anticipation of Rebound

Taiwan Semiconductor has achieved a 17.5% cumulative average growth rate (CAGR) in revenue and 17.1% in earnings since its initial public offering in September 1994 on the Taiwan Stock Exchange. Its management announced that it is targeting revenue CAGR of 15-20%, gross margin of 53% or higher and return on equity (ROE) above 25% between 2021 and 2026.

The company boosts of having the semiconductor industry’s highest credit rating of AA- with the S&P and Aa3 with Moody’s. Another strength is that Taiwan Semiconductor has relied only on its own internally generated funds to finance its organic growth, company officials indicated.

The company’s two largest U.S. clients are Cupertino, California-based Apple (NYSE: APPL), a global multinational technology company, and Chicago’s Archer-Daniels-Midland Company (NYSE: ADM), which combined to account for more than 36% of Taiwan Semiconductor’s revenue from this business segment. With Apple and Archer-Daniels-Midland, a Chicago-based multinational food processing and commodities trading business founded in 1902, their sales reflected a 24% jump in the past year and a 64% increase in its share of the U.S. computer chip market, company officials reported.

Chart courtesy of www.stockcharts.com

iShares MSCI Taiwan Is One of Five Semiconductor Investments to Buy at Reduced Prices

For investors wary about buying shares of TSM with its share price hitting 52-week lows, an alternative way to take a sizeable position in the company with less all-or-nothing risk is to buy iShares MSCI Taiwan ETF (EWT). TSM composes more than 21% of the exchange-traded fund (ETF), while technology companies make up 58% of EWT. It’s a low-cost, diversified way to capture this opportunity.

The fund slid 8.67% in the past month and 9.89% so far in 2022, while rising a modest 4.96% in the past year. However, the stock price remains vulnerable with the Fed raising interest rates, inflation rising, supply chain challenges and Russia’s continuing onslaught of Ukraine that has caused the deaths of thousands of people on each side since Putin’s invasion began on Feb. 24.

Chart courtesy of www.stockcharts.com

SOXX is the Second of Five Semiconductor Investments to Buy at Reduced Prices 

A global way to invest in semiconductor is iShares Semiconductor ETF (SOXX). The fund tracks the ICE Semiconductor Index. Top holdings recently were Broadcom (NASDAQ: AVGO), Advanced Micro Devices (NASDAQ: AMD), Qualcomm (NASDAQ: QCOM), NVIDIA (NASDAQ: NVDA) and Intel (NASDAQ: INTC). It owns 30 stocks, and 60% of the fund is in the 10 largest positions.

SOXX also has endured a share price plunge in recent months. The fund is down 9.50% for the past month and 22.49% so far this year, while climbing 5.04% in the past 12 months. 

Chart courtesy of www.stockcharts.com

Invesco’s PSI Is the Third of Five Semiconductor Investments to Buy at Reduced Prices

A more volatile but potentially more rewarding fund is Invesco Dynamic Semiconductors ETF (PSI). The fund tends to invest in smaller companies than SOXX and those selling at deeper values, Carlson continued. 

PSI also invests in companies with higher standard deviations than the index. The fund is actively managed and looks for high-quality stocks, with lower financial leverage and solid returns on equity.

PSI’s top holdings recently were Texas Instruments (NASDAQ: TXN), Broadcom (NASDAQ: AVGO), Applied Materials (NASDAQ: AMAT), NVIDIA (NASDAQ: NVDA) and Qualcomm (NASDAQ: QCOM). It also owns 30 stocks but has 46% of the fund in the 10 largest positions. The fund has sunk since the start of the year, giving new investors a chance to pick up shares for a relative bargain. The fund has fallen 9.05% for the past month and 24.56% so far this year, while nudging up just 0.12% in the past year.

Chart courtesy of www.stockcharts.com

More semiconductor fabrication facilities are becoming established in the United Sates to add to its independence — “just like oil,” said Michelle Connell, CFA, president and owner of Portia Capital Management, of Dallas, Texas.

Michelle Connell, CEO, Portia Capital Management

 NVIDIA Is the Fourth of Five Semiconductor Investments to Buy at Reduced Prices 

Connell told me she likes NVIDIA (NASDAQ: NVDA), a Santa Clara, California-based pioneer of graphics processing unit GPU-accelerated computing that went public on January 22, 1999. Graphics processing is one of the most important types of computing technology, both for personal and business computing. Designed for parallel processing, the GPU is used in a wide range of applications, including graphics and video rendering. Although they’re best known for their capabilities in gaming, GPUs are becoming more popular for use in creative production and artificial intelligence (AI).

Even though GPUs originally were designed to accelerate the rendering of 3D graphics, they later became more flexible and programmable, enhancing their capabilities. This allowed graphics programmers to create more interesting visual effects and realistic scenes with advanced lighting and shadowing techniques. Other developers began to tap the power of GPUs to dramatically accelerate additional workloads in high performance computing (HPC), deep learning and more.

NVIDIA focuses on products and platforms for the large, growing markets of gaming, professional visualization, data center and automotive industries. The company’s creations are used by demanding gamers, designers and scientists. Thus, NVIDIA’s work is at the center of consequential technology mega-trends.

Chart courtesy of www.stockcharts.com

Lam Research Is the Fifth of Five Semiconductor Investments to Buy at Reduced Prices

Lam Research Corp. (NASDAQ: LRCX), a Fremont, California-based supplier of wafer fabrication equipment and related services to the semiconductor industry, has slid throughout the last year. It is down 18.12% for the past month, 32.29% so far in 2022 and 8.37% for the last year.

That drop now positions the stock to rise upward of 35%, Connell predicted. She called it a buy at the currently depressed price of its shares. 

Chart courtesy of www.stockcharts.com

Despite Putin’s continued aggression against Ukraine, amid protests in Russia that included a journalist showing an anti-war sign on a national news broadcast and claiming the country’s government-controlled media was lying, demand for advanced semiconductors remains on the rise.

COVID-19 Cases Exceed 461 Million Worldwide and Near 80 Million in America

COVID-19 remains a factor for businesses worldwide and China is suffering its worst outbreak since the virus emerged in Wuhan. COVID cases also are climbing in European countries such as Germany, the Netherlands and Switzerland.

COVID-19 deaths worldwide exceeded 6 million to total 6,051,011 on March 15, according to Johns Hopkins University. Cases across the globe have soared to 461,461,685, up more than 11 million in the past week alone.

U.S. COVID-19 cases, as of March 15, hit 79,586,694, with deaths rising to 966,386. America has the dreaded distinction as the nation with the most COVID-19 cases and deaths.

As of March 15, 254,681,134 people, or 76.7% of the U.S. population, have obtained at least one dose of a COVID-19 vaccine, the CDC reported. Fully vaccinated people total 216,767,955, or 65.3%, of the U.S. population, according to the CDC.

The five semiconductor investments to buy at reduced prices should start to recover in the months ahead, as Putin’s war is likely to prove pitfall-prone and China may delay any invasion of Taiwan and other Asian nations after watching much of the world condemn Russia’s actions and combine to apply stiff economic stations on the predatory military machinations. The stronger the fight and resolve of the Ukrainian people to fend off Putin’s forces to preserve their freedom and their democracy, the less eager China may be to follow the path of Russia to become the next international pariah.

Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Seeking Alpha, GuruFocus and other publications and websites. Paul, who can be followed on Twitter @PaulDykewicz, is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul previously served as business editor of Baltimore’s Daily Record newspaper. Paul also is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The book is great as a gift and is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many others. Call 202-677-4457 for multiple-book pricing.

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