For today’s report I screened through the semiconductor stocks that are trading below $10 but above one buck. I culled the list down to 9 stocks by eliminating those that had either incomplete ValuEngine data, or did not have the pricing history to calculate the full range of value levels, pivots and risky levels.
The Computer and Technology Sector is 4.9% overvalued according to www.ValuEngine.com in an environment where eleven of sixteen sectors are overvalued, six by double-digit percentages. The Semiconductor Industry is 12.4% overvalued.
According to Thomson/Reuters there has been a 10.2% drop in earnings estimates in the Tech Sector, second only to Basic Materials. The reason cited is weak overseas demand. In semiconductors we have seen notable earnings warnings including one from Advanced Micro Devices (AMD).
Reading the Table
V / UN Valued: The stocks with a red number are undervalued by this percentage. Those with a black number are overvalued by that percentage according to ValuEngine. BZH is the most undervalued by 59.1%. GFA is the most overvalued by 65.7%.
VE Rating: A “1-Engine” rating is a Strong Sell, a “2-Engine” rating is a Sell, a “3-Engine” rating is a Hold, a “4-Engine” rating is a Buy and a “5-Engine” rating is a Strong Buy. <P/> 3 stocks are rated Strong Sell, 5 are rated Sell, six are rated Hold, and only one, CX, is rated Buy.
Last 12-Month Return (%): Stocks with a Red number declined by that percentage over the last twelve months. Stocks with a Black number increased by that percentage. The best performer over the past twelve months is HOV with a gain of 262.1%. The worst performer over the past twelve months is SKY with a loss of 43.2%.
Forecast 1-Year Return: Stocks with a Red number are projected to decline by that percentage over the next twelve months. Stocks with a Black number in the Table are projected to move higher by that percentage over the next twelve months. The best projected gain is 6.8% CX. The worst projected loss is SKY 19.6%.
P/E Ratios: Only ICA has a reasonable P/E ratio, while the others don’t have one, or the P/E ratio is extremely elevated.
Value Level: is the price at which to enter a GTC Limit Order to buy on weakness. The letters mean; W-Weekly, M-Monthly, Q-Quarterly, S-Semiannual and A- Annual.
Pivot: A level between a value level and risky level that should be a magnet during the time frame noted.
Risky Level: is the price at which to enter a GTC Limit Order to sell on strength.
Advanced Micro Devices, Inc. (AMD) – set a multi-year low at $2.74 on Friday with its November 2008 low at $1.62.
Atmel Corporation (ATML) – set a multi-year low at $4.72 on Friday with its October 2008 low at $2.50.
Cypress Semiconductor (CY) – set a multi-year low at $2.74 on Friday with its November 2008 low at $3.54.
LSI Corporation (LSI) – has a negative weekly chart profile with the 200-week simple moving average a key support at $5.82 with the November 2008 low at $2.36.
Micrel Inc. (MCRL) – has a negative weekly chart profile with Friday’s close just below the 200-week simple moving average at $9.85 with the January 2008 low at $4.79.
Marvell Technology (MRVL) – set a multi-year low at $8.68 on Friday with its November 2008 low at $4.48.
ON Semiconductor Corp. (ONNN) – set a multi-year low at $5.84 on Friday with its November 2008 low at $2.35.
Photronics Inc. (PLAB) – has a negative weekly chart profile with Friday’s close below the 200-week simple moving average at $5.38 and the November 2008 low at $0.33.
United Microelectronics (UMC) – has a negative weekly chart profile with Friday’s close just below the 200-week simple moving average at $2.76 and the November 2008 low at $1.47.
Where to Buy and Where to Sell
A “Value Level” is a price at which buyers should add to positions on market price weakness. A “Risky Level” is a price at which sellers should reduce holdings on market price gains. A "Pivot" is a support or resistance (Value Level or Risky Level) that was violated in its time horizon, acting as a magnet during the remainder of that time horizon. These levels are calculated in weekly (W), monthly (M), quarterly (Q), semiannual (S) and annual (A) time horizons, based on the past nine closes in each time horizon. My theory is that the closes over a nine-year period are the summation of all bullish and bearish events for that market or specific stock. These levels are the most important element of my Buy and Trade Strategy.
Buy and Trade Guidelines
Investors should consider entering good until cancelled (GTC) orders to buy weakness to a value level, or to sell strength to a risky level.