In the financial world, demand and supply chain is important for almost every industry, and whenever the gap comes between these two things the prices change dramatically. And the same situation happened with many sectors due to pandemics.
But if talk about the one industry which is the backbone of the majority of a global business that is Semiconductor.
The semiconductor Stocks are booming, and the reason for this is the high-demand & low-supply problem. This can be seen in the prices of enterprise, consumer tech goods, and also in stock prices.
By December 2020, the S&P 500 Companies had climbed almost 30%, while the SOX index had soared by more than 89%.
Yaa this report makes a smile on investors’ faces but the semiconductor industry is a little-known gem that the average investor can tap into. Most people don’t know how much of an impact semiconductor stock has on our lives — and how much of an impact they can have on your portfolio.
So In this blog, we will learn about the semiconductor industry, its impact on the world economy, its stock price movement, and what semiconductor stocks to look for in 2022.
You can also check –
Top 10 Semiconductor Stocks By Market Cap
Companies such as TSMC (54% market share) and Samsung (17%) lead the semiconductor market, although for investors it is more important to consider stocks with a great combination of performance and value.
|Stock||Price||Marketcap||Change %||Change||Volume||EPS||Dividend Rate||Dividend Yield||52 Week Range||Sector||Industry||Country|
Taiwan Semiconductor Manufactur
ASML Holding N.V. - New York Re
|$611.3||250.2B||0.52%||$3.1||1,245,926||14.4||5.1||0.8%||Technology||Semiconductor Equipment & Materials||Netherlands|
Advanced Micro Devices, Inc.
Applied Materials, Inc.
|$107.0||92.1B||2.36%||$2.6||6,976,243||7.4||1.0||0.9%||Technology||Semiconductor Equipment & Materials||United States|
Micron Technology, Inc.
NXP Semiconductors N.V.
Before jumping on which stock is better for your portfolio, I want to talk about semiconductors, like what is that, why this industry is necessary, and how it’s going.
What Is Semiconductor?
Basically, Semiconductors are highly specialized devices that provide the backbone for any electronic product to operate. They perform the critical task of conveying digital information in such a way that it can be interpreted and used by computers, phones, tablets, TV, music player, and other digital devices.
The materials needed to fabricate semiconductors are very specific and difficult to work with, which has limited their use for many years. The development of innovative materials and processes has made production much more widespread.
Now, technological innovation is driving this industry forward at an unprecedented rate. There are many factors impacting the future of this industry in the coming years, including energy efficiency, internet companies, outsourcing, and green technology — none of which are slowing down anytime soon.
This has opened up many new possibilities since companies can rely on this robust material as opposed to having to create their own every time a new device is created. This industry will continue to expand and provide new methods for electric devices, reaching consumers across the globe for a variety of purposes.
As we know Covid-19 hit the overall market and industries which makes a global rush for semiconductors has created a chip shortage that is squeezing computer and consumer electronics firms. The shortage has been driven by rising demand, the adoption of 5G devices, and the need for new chips to go into autonomous vehicles.
Though some analysts are predicting the chip shortage will last through 2023, some companies may respond to the shortage with new factories built over many years, requiring billions of dollars in capital.
Here are the top semiconductor devices by market size which is affected by covid-19.
Semiconductor Industry Performance
The market has been hot recently and semiconductor performance is no different. Many stocks have seen their stock prices increase significantly due to high demand in the industry. It’s always a good sign when more companies are gaining more demand and this is a simple trend to follow as you can read industry reports that tell you which areas are doing better than others.
How to Identify Best Semiconductor Stocks By Own
As an investor, many people start looking for how to select stock by own and find out a good company to invest. In my opinion, there are 4 factors I want to consider before investing in a stock in any industry.
#1 Strong Fundamental
If you’re interested in investing in semiconductor stocks, you should be aware of companies that have steadily grown their sales over the years. These firms have a leg up on their competition during downturns.
A big-picture strategy is the only way to stay afloat during the cyclical nature of this industry. Companies with a strong fundamental outlook always keep their eyes on the prize — increased sales over time — even if they risk losing out in the near term.
#2 Leader Or Near Leader
You have seen many times when a specific sector or industry grows the first benefit taken by the leader or near leader companies. For example, when some of the most innovative and useful technology was created it was Intel, Apple, Google, and Microsoft that benefited first. That’s means leaders are important and you cannot ignore them.
#3 ROIC, Margin & Cash Flow
When growing a business, it’s important to know that your revenue is translating into profit. Profit can be the lifeblood of business capitalization and growth. A very high level of gross profit, operating profit, ROIC, and cash flow generation is a positive indicator that the company is growing and actively reinvesting in its own growth and operating efficiently.
#4 Debt Ratio & Competitive Advantage
Debt-free businesses have numerous advantages, often more powerful investments, and are a solid investment option than those with high levels of debt. This is because equity investors can reap the benefits of lower monthly interest expenses and more repayment flexibility.
And also a competitive advantage which is something one business has over another. It is an advantage that provides a company with long-term sustainability.
Bonus Tip – For better results learn & use Technical Analysis + Fundamental Analysis.
5 Best Semiconductor ETFs
If you do not want to pick stocks of individual companies in the semiconductor industry, then exchange-traded funds that focus on industries or sectors are good alternatives.
|ETF Symbol||Expense Ratio||Price ($)|
Also, Check –
Should You Invest In Semiconductor Stocks?
When you think of the semiconductor industry, you most likely think of hardware, Bitcoin miners, drug infusion pumps, and exoskeletons might be some of the products that come to mind.
But there is more to this cutting-edge industry than just silicon chips. Several factors explain the industry’s global growth, and they can be found by looking at the financial results of chip-related companies.”
This is an industry essential to the world’s biggest businesses because without it they can’t even run properly. As an investor, nothing could be better than this.
Disclaimer For Investors ❗
The information included at this site is for educational purposes only and is not intended to be a substitute for investment advice. Data on past performance, where given, is not necessarily a guide to future performance. So before investing you should carefully consider the Fund’s investment objectives, risks, charges, and expenses.