If semiconductors could talk, you know what they would say? "Get me out of these darned ETFs, we don't belong in them."
Throughout this period of turmoil, we have had a level of generalization about whole companies, whole industries, whole sectors, that makes me sick, because it shows how little homework most people, including commentators, do.
I know there are plenty of people who say "I don't talk about individual stocks, or, I am not allowed to talk about individual stocks," and it makes me sick. Can you imagine if someone were to come on ESPN and say he couldn't talk about individual teams, let alone individual players? I can't talk about teams in the NFL but I like those in the AFC south more than NFC East?"
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But there is nothing worse than what's going on right now when people talk about the semiconductors. Their blanket endorsement of the group leads uniformed investors to ETFs, which have the best -- Nvidia (NVDA) , Advanced Micro Devices (AMD) -- mushed into the worst, which is Intel (INTC) .
So, what I want to do is deconstruct the edifice and tell you what you are really buying, or at least the preponderance of the companies that you are buying, so it is not the blind leading the blind.
Let's start with the cellphone semis. In order to have a top-drawer cellphone, you need equipment from Skyworks Solutions (SWKS) and Qorvo (QRVO) and Cirrus Logic (CRUS) . Software? That's Qualcomm (QCOM) . All of these are buys off the news that Apple (AAPL) might raise its plans for more of the iPhone 12.
Then there's AMD. It's taken huge share from Intel in PCs, it has a terrific presence in the data center and gaming -- and now, with the Xilinx (XLNX) deal, if it is approved, you are going to get cellphones and defense among other elements.
Nvidia? Gaming, data center, edge computing as well as anything artificial intelligence that needs to be powered by a chip. Highest end. It's trying to buy Arm holdings, which would put it at the top of the line with all PCs.
Then there's Broadcom (AVGO) , which has a ton of cellphone but a lot of controllers and then a lot of software, a real hodgepodge.
There are the internet of things plays. NXP Semiconductor (NXPI) has a ton of auto as well as cellphone. Texas Instruments (TXN) and Analog Devices (ADI) are the equivalent of industrials themselves. Micron Technology (MU) makes commodity semis that are in pretty much anything electronic. Same with Taiwan Semiconductor (TSM) , which is a giant among semis and is everything, too.
Then there's Intel, which is really a PC and server company trying to make it in the tough world of autonomous driving.
Finally, there are the semiconductor equipment companies, the ones who make the machines that make semis, Lam Research (LRCX) , ASML (ASML) , Applied Materials (AMAT) and KLA (KLAC) .
Now, of course there are other semis and other usages, but these are the companies you see in the semi ETFs.
What is my point here, besides telling you what they do? I am trying to get people educated into knowing what they own. I want them to recognize that there is no homogenization. Intel was king of the semis. Now it is AMD. That doesn't show up in the ETFs. Nor will the Nvidia buy of Arm Holdings.
Far too often companies create ETFs that lure people into buying the good and the bad. These ETFs denigrate by making them part of a mediocre basket -- and I have had it with the notion that companies and managements do not matter, only sectors do. May I suggest going forward that you know your stocks, know your managements and know the greatness of the exes-or not, and buy the best and leave the rest to those who don't know what they are talking about and aren't going to bother to do the homework, the discipline that I always say is at the heart of what I teach.
(NVDA, AAPL, AMD and AVGO are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)
