Is it too late to get on board the semiconductor train? Have you missed the moved that seems to have engulfed everything from Micron Technology (MU) to Teradyne (TER) to Nvidia (NVDA) and Lam Research (LRCX) ?
I don't think you missed it, if the stocks pull back for an exogenous reason. And it is case by case. Some have pulled out. Some haven't -- and the have-nots may not play catch up.
Let me give you the lay of the land.
First, what's happened is demand for all sorts of product is rippling throughout the system. It stems from actual demand for raw product, namely the shockingly positive sales for the Apple (AAPL) iPhone 11. I have been saying for some time that unless you know how great this phone is by experiencing it yourself, you cannot grasp the step function that's occurring here.
A good example is the flood of new orders announced just yesterday by Taiwan Semiconductor (TSM) . If Taiwan Semi is seeing increased demand, that means so is Skyworks (SWKS) , NXP Semi (NXPI) , Cirrus Logic (CRUS) , Micron, Broadcom (AVGO) , Qualcomm (QCOM) and Qorvo (QRVO) . Now the way you can measure where these stocks can come from is simply to examine what happened in November of 2018, when Micron announced that that then iPhone cycle was breaking down.
No cycle breakdown is so sudden that it can't be anticipated. People with knowledge of the cycle started selling at $62, six months ahead of the announced shortfall. That's the top.
We are now eight months from the bottom of the cycle. That's pretty late. But given the strength of the cycle, it is realistic that Micron will take out $62 this time around.
The issue as I see it is that all of the other stocks in the Apple chain have ALREADY exceeded where they were in the last cycle. That makes buying them right here a pretty dangerous game.
I feel the same way about the semiconductor capital equipment stocks. After last night's Teradyne blowout, there will be no one who is left to discover the turn. We are scaling out of Lam Research for the charitable trust, Action Alerts Plus. It is up too much.
That leaves Micron, Qualcomm and perhaps Broadcom, because it has been kept back from the acquisition of CA Technologies, which is mainframe-oriented, NOT Apple-oriented.
You can't stray too far. We saw last night that Texas Instruments (TXN) it too auto-oriented. The same will be the case with Analog Devices (ADI) .
You can still buy an outlier: Western Digital (WDC) has flash technology, which is now in high demand.
But without a pullback, I think you are in the "missed it" camp. That's okay, pullbacks are expected. However, if you just wake up today and think you have something, I now think you are sorely mistaken.
