We know that the automobiles of today will at some point in our lives morph into being self-driven. What you may not know, though, is that Cypress Semiconductor (CY) figures to be one of the major players in this move.
Founded in 1982, Cypress makes a broad line of semiconductors. Today, the company is focused, among other growing areas, on developing and manufacturing semiconductors for the automotive sector as well as the Internet of Things.
Autonomous cars should be safer and allow "driver/passengers" more freedom to do other things while in their cars. One analogy is to airplane passengers who are not concerned with the piloting of the airplane or much of anything else other than thinking "are we there yet?"
As for the IoT, the network of devices, vehicles, appliances and other items embedded with electronics, software, and network connectivity enabling these objects to connect and exchange data, it will change our world for the better, if not in a major way.
IoT is big money now and will be huge money in only a few years. Thus, owning CY as we morph into the IoT era makes investment sense.
Recently, KeyBanc Capital Markets named CY as one of its two top picks as per being a takeover candidate in 2018 (Teradyne (TER) is the other).
Trading between $10.99 and $17.42 over the past 52 weeks, CY gained 34% in 2017! Was that 34% gain a surprise for you? Well, since May I have posted six CY options-related trades, all from the bullishly biased side. Three of the trades were not able to be opened because CY basically shot up the day they were posted, shooting too far over the suggested price level (best never to chase any trade to open it). So be it. The other three were nicely and profitably closed out in a short time frame.
Fundamentally, CY recently trades at a forward P/E (price-to-earnings) multiple of just 13x. Headline-type earnings improvements and growth should be forthcoming as we move further into 2018.
Technically, those CY trades were largely set up due to CY offering a buy-the-dip opportunity. The stock is once again showing me that same type pattern forming. And I go with a pattern until it does not work.
As far back as last May, I liked the future prospects for CY's stock, and call options. That remains the situation now.
So how does one play the prospective bullish CY in 2018?
Obviously, a straight buy of the common stock is number one. And of course, if buying for investment purposes as well as trading a stock, it is always the best approach to scale into what will become the total position.
Using the CY options markets is another approach as its options are liquid, with mostly fair spreads between the bids and the asks. Once again, always scale into an options position.
This column originally appeared on Jan. 4 on Real Money Pro, our premium site for active traders and Wall Street professionals. Click here to get great columns like this even earlier in the trading day.