In this article we discuss the 5 best semiconductor stocks for 2021. If you want to read our detailed analysis of the semiconductor industry, go directly to 10 Best Semiconductor Stocks to Buy in 2021.
5. Broadcom Inc. (NASDAQ: AVGO)
Number of Hedge Fund Holders: 59
Headquartered in in San Jose, California, Broadcom Inc. is the leading designer, developer, and supplier of semiconductor and infrastructure software products and solutions globally. The company serves the wireless, networking, enterprise, broadband, storage and industrial markets. The company beat the Street’s estimates for fiscal first quarter, driven by continued strong demand for semiconductors. Management mentioned that bookings were up 63% due to higher-than-expected demand and the company is already 90% booked for 2021. Also, the company has a track record of generating substantial amount of free cash flow, about $3.5 billion a quarter, half of which is distributed among shareholders via dividends.
As of the end of the fourth quarter, 59 hedge funds in Insider Monkey’s database of 887 funds held stakes in AVGO. Cantillon Capital Management is the company’s biggest stakeholder, with 1.2 million shares worth $505.7 million.
4. NVIDIA Corporation (NASDAQ: NVDA)
Number of Hedge Fund Holders: 88
Headquartered in Santa Clara, California, NVIDIA Corporation operates as designer of graphics processing units for the gaming devices and also provides processors on chip units for the mobile computing market. The company’s products are also used in professional visualization and automotive markets. In February 2021, NVIDIA reported Q4’20 results – top line beat consensus by about $180 million and bottom line beat by $0.29, driven by solid growth of 67% year-on-year in Gaming business and management expects strong margins to continue going forward. Additionally, in September 2020, NVIDIA announced its plan to acquire Arm from SoftBank Group – the transaction is expected to complete by March 2022 and will be immediately accretive to the company’s gross margin and EPS.
With a $2.5 billion stake in NVIDIA, GQG Partners owns 3.7 million shares of the company as of the end of the fourth quarter of 2020. Our database shows that 88 hedge funds held stakes in NVDA at the end of the fourth quarter, versus 82 funds at the end of the third quarter.
3. Advanced Micro Devices Inc (NASDAQ: AMD)
Number of Hedge Fund Holders: 74
Headquartered in Santa Clara, California, Advanced Micro Devices, Inc. operates as a semiconductor company worldwide through its two segments – ‘Computing & Graphics’ and ‘Enterprise, Embedded & Semi-Custom’. In January 2021, AMD reported its fourth quarter 2020 results – posting a solid revenue growth of 53% year-on-year and 16% quarter-on-quarter, driven by strong sales of its processors. The company also achieved record annual net earnings and FCF; and guided strong growth in all businesses in 2021, leading to a revenue growth of 37%. Accordingly, its price targets were raised by many analysts from well-known investment banks, like Northland, Susquehanna Financial Group, Barclays, etc.
As of the end of the fourth quarter, 74 hedge funds in Insider Monkey’s database of 887 funds held stakes in AMD compared to 71 funds in the third quarter. Arrowstreet Capital is the company’s biggest stakeholder, with 10.3 million shares worth $944 million.
2. Applied Materials Inc (NASDAQ: AMAT)
Number of Hedge Fund Holders: 61
Headquartered in Santa Clara, California, Applied Materials, Inc. provides manufacturing equipment, and software & services to the semiconductor and display industries. Like Micron, Applied Materials has a good track record of posting revenue and EPS beat in almost all of its quarterly earnings since January 2017. In February 2021, the company reported its latest quarterly earnings, in which revenue beat by $195 million and EPS beat by $0.11 and management provided a strong outlook for 2021 – expecting DRAM spending to grow much faster than NAND. After reporting strong results and better guidance, many analysts raised their price targets – as per a news report, J.P. Morgan, Deutsche Bank, Barclays, Mizuho, KeyBanc and Needham have raised their price targets on Applied Materials. Also, the company plans to hold its investor meeting in early April 2021, where it will provide detailed analysis of the major growth drivers that will shape its markets over the next 5-10 years – this is likely to boost the share price further.
According to our database, the number of AMAT’s long hedge funds positions increased at the end of the fourth quarter of 2020. 61 funds hold an Applied Materials Inc. position compared to 59 funds in the third quarter. The company’s most significant stakeholder is Generation Investment Management, with 5.2 million shares worth $452 million.
1. Micron Technology Inc (NASDAQ: MU)
Number of Hedge Fund Holders:
Topping the list of the best semiconductor stocks to buy in 2021 is Micron. Headquartered in Boise, Idaho, Micron Technology designs, manufactures, and sells memory and storage products globally. Micron has a good track record of posting top-line and bottom-line beat in almost all of its quarterly earnings since May 2017. In January 2021, the company reported its latest quarterly earnings and revenue beat the street estimates by $110 million and EPS beat by $0.09, led by an improving business environment and better-than-expected demand and pricing for both DRAM and NAND. Additionally, commentary at its earnings conference call suggests continued strong demand in all of the end markets in 2021. According to FactSet data, 29 out of the 35 analysts have buy or overweight ratings for Micron.
As of the end of the fourth quarter, 100 hedge funds in Insider Monkey’s database of 887 funds held stakes in MU, compared to 79 funds in the third quarter. Arrowstreet Capital is the company’s most significant stakeholder, with 17.6 million shares worth $1.3 billion. Micron Technology ranks 21st in our list of the 30 Most Popular Stocks Among Hedge Funds: 2020 Q4 Rankings.
In the Q4 2020 Investor Letter, Bonsai Partners highlighted a few stocks and Micron Technology Inc (NASDAQ:MU) is one of them.
Here is what Bonsai Partners said:
“Micron is a manufacturer of memory semiconductor chips. Micron’s stock appreciated 60.1% during the quarter.
Micron’s shares significantly appreciated this quarter for a couple of reasons. First, and most importantly, the DRAM market appears to have begun its cyclical rebound. As a result, we will likely see higher pricing and profitability through at least the calendar year 2021, hopefully meaningfully longer.
Another (and less meaningful) driver wasthat semiconductor stocks have become ‘en vogue’ once again. I may not be old, but I’ve been around the sector long enough to know that when generalists start getting excited about a ‘new paradigm’ around semiconductors, it’s time to be wary.
I wouldn’t call Micron overvalued, but I’d certainly say it’s more fairly priced today compared to when we first purchased it a few months ago.”
You can also take a peek at Top 10 Car Company Stocks to Invest In and Ray Dalio’s Top 10 Stock Picks for 2021.
