Texas Instruments Incorporated (TXN), Analog Devices, Inc. (ADI), Xilinx, Inc. (XLNX): Three Semiconductor Stocks to Consider Buying

Xilinx: Reduced risk opportunity

For even less risk, consider adding Xilinx, Inc. (NASDAQ:XLNX) to your semiconductor portfolio. This company has been a consistent winner over the past 4+ years — through good times and bad. It has had similar EPS growth over the past 5 years, and is forecasted for relative acceleration over the next 5 years. Its margins are 700 basis points greater than the industry average, which makes Xilinx, Inc. (NASDAQ:XLNX) less vulnerable to shortages and surpluses.

Xilinx, Inc. (NASDAQ:XLNX) also has a very clean balance sheet. There is no long-term debt, and the quick ratio is healthy at 1.5. More than 15% of the market capitalization is represented by just cash alone. Despite industry-wide uncertainty, EPS has beaten expectations in all of the last 5 quarters. Beta, a measure of volatility, is roughly in-line with the market.

Conclusion

Semiconductors are a risky market with frequent supply and demand changes. However, risk can be reduced by investing in Xilinx, Inc. (NASDAQ:XLNX) and Analog Devices, Inc. (NASDAQ:ADI). Texas Instruments Incorporated (NASDAQ:TXN) is in worse financial shape and operationally struggling, yet it trades at roughly the same PE multiple. For this reason, I recommend avoiding Texas Instruments Incorporated (NASDAQ:TXN) and investing in its peers.

The article 3 Semiconductor Stocks to Consider Buying originally appeared on Fool.com and is written by David Gould.

David Gould has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. David is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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