Semiconductor stocks are worth buying when weak, portfolio manager John Petrides told CNBC’s “Trading Nation” on Thursday.
“My team in particular is in a downward buying mentality for the entire equity market,” said Petrides, who works in the wealth division of Tocqueville Asset Management.
“We would also like to buy the chips down when the semiconductor, chip stocks, sell because the long-term fundamentals are pretty strong.”
Although the global chip shortage has raised concerns about the group’s near-term prospects, the rise of 5G, autonomous vehicles and other chip-dependent industries paints a more optimistic picture in the long term, said Petrides.
“If these companies can pass the prices on, it will be a home run for these individual chip stocks,” he said. “You’re going to have this massive replenishment of inventory, in my opinion, for companies that don’t want to run out of inventory again… which is going to lengthen the cycle of demand for chips.”
With Taiwan Semiconductor generating strong third-quarter earnings linked to demand linked to the chip shortage, all space could be setting up for a welcome windfall this reporting season, Quint Tatro of Joule Financial said in the same interview.
“A lot of those actions have been punished. There is, I think, finally some value here,” said the company’s chief investment officer.
“We weren’t looking for those stocks on the upside, but… from a business point of view you have to look and see what has really been strong and go with what future leaders might be, and that brings us to AMD [Advanced Micro Devices]. “
Although the stock is expensive, trading at over 41 times the futures price / earnings multiple, its relative strength and the company’s ability to pass price increases on to its clients could become important catalysts, Tatro said. .
“If we see this increase in profits due to these abilities to pass prices on to consumers, I think it might, in the rearview mirror, look like cheap action here,” he said. “If we just go back to the multiples, with increased profits, that we saw six or nine months ago, these stocks go much higher.”
Disclosure: Quint Tatro and Joule Financial own shares of Advanced Micro Devices.