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the Zacks rank value momentum growth and income all factor in to Zacks rank PI's we're talking technology more specifically semiconductor stats with Ryan McQueen II who edits our income investor service here at Zacks and you've got a couple of interesting names here one of which has been around for a long time yeah so I think it's an important time to talk about the semiconductors right now because it was an interesting year for this on my conductors in 2018 and we'll see how this all plays out in 2019 the thing that we've been talking about over the past year with the semis is the end of the cycle this was the end of the super cycle if you will if it is over which I think as we'll get to it we'll probably seeing right at the end of it here and this this is a cyclical business in a lot of different ways but it ends up being cyclical for investors because there's some sort of new technology or several new technologies that come out at once it creates a rise in demand for the semiconductors this sparks revenue and earnings growth over several year periods of times it's in some cases and then eventually the supply and demand don't match up typically it's a pullback in demand that creates an oversupply that there's there's issues with pricing and we see the stocks pull back as well you can go and look at a historical chart of really any of these big semis and you'll see exactly what I'm talking about when you see that so to start this conversation we're gonna talk about the one of the most popular semiconductor ETFs that's Sox s o X X and this is what I want to take a look at just so we can get a feel for what the past year has looked like for the entire industry we've drawn the 50-day moving average in the 200-day moving average on this chart just so we can again also get a feel of just the most basic of techne you hear and as we can see it was a choppy quite the choppy year for the semiconductor stocks as it was quite choppy for the broader market but definitely the semiconductors if you're feeling the brunt of that you know just again from the most basic sense we see here the 200-day serves some sort of support here a few separate times we see it come down and test the 200-day before eventually in this October sell-off we see this kind of capitulation event it breaks down here below the 200-day we try to find these different bottoms we're kind of making lower lows or really the same load you'd think that that those bottoms might hold up and then in the December sell-off it all comes crashing back down of course you know we're bouncing off of that low hard this is the Christmas Eve low and we've gotten all the way back up here to the 50-day moving average and we're kind of at a period of time where we're trying to figure out if that's gonna be a level of resistance or potentially a level of new support here and we might break into this range between the 50 and the 200-day and start start trading in that range again now the what's interesting about this is that you see some components of this fund that really mimic this exact type of chart pattern and have really displayed exactly the story I'm talking about this cyclical story you see those play out and there's other components where there's potentially a stronger type of investment thesis right now where it looks like for whatever reason the cyclical nature of the industry not quite hitting it as hard right now and to start that conversation I want to talk about Texas Instruments a company that if you don't follow the semiconductors business you know because of its calculators but if you do yeah if you do follow this on my conductores business you know the texas instrument is one of texas instruments is one of the world's largest manufacturers right now semiconductors so this is the chart same exact row just looking at for the socks fun but this is Texas Instruments we have the 50 day and the 200 a drawn on here very similar chart pattern to the the broader fund we see here the 200 a acting as kind of some support throughout the year really even the 50-day at times acting as support in these dips but then again here in October the floor kind of falls out of everything and then we see another pullback to new lows in December again the christmas eve low and then we've rallied back all the way up over the 50-day and we're trying to kind of wait and see here whether the 50-day is gonna act as a new level of support that being said when you're talking about lines on charts and you talk about price performance it is it is always important to look at the fundamentals because at some point here the the earnings trend is playing a role when you talk about okay we're right here at the 50 are we gonna break higher we can start trading in this range well the earnings trend is gonna have something to say about that so let's look at the earnings estimates for texas instruments right now this is actually a Zacks rank number for sell stock and it's because these earnings estimates have been coming down specifically for 2019 we see the estimates coming down we should get the the report here for 2018 and wrapping up that year soon but she come 23rd I believe I so okay so that would be next week we see these axe consensus 90 days ago was at 605 for 2019 it's all the way down here to 548 on the back of what we see three and downward estimates within the last 60 days two of those coming within the past month so that's not a great view on the companies 2019 prospects we're looking at EPS growth to finish the year at 30% in 2018 which you'd think wow that we just looked at that one year chart where the stock has really struggled to generate any maintain any positive momentum we're looking at 30% EPS growth that's because the market is forward-looking so that this conversation we've been having about the end of the cycle it's not quite it's happening right now that's now we're seeing in the share prices is what we're seeing in the share prices is is it's coming in 2019 and so we're looking at EPS growth to finish it in 2018 at 30% as I said there's active consensus now that 548 figure that's down about one percent for 2019 based off of what we expect 2018 to finish at so that is the the peak to trough conversation that we're having how far do you fall from the earnings peak to the bottom of this trough when when the cycle pulls back 1% that's not too bad will the estimates come down further we'll probably have to wait and see what the company says in next week's earnings report but at some point when the stock has pulled back there is a value case and in a dividend yield case to be talked about I don't know if we're quite there with Texas Instruments where it where it is a no-brainer especially with the earnings report risk potentially still to come so 3.2 percent yield and it's trading at 18 times earnings right now so I don't know if we're quite there especially when I think there are better deals to be had that have stronger share price trends as well and if you'd allow me I'll talk about that one well both of these companies bottom line they're still worth keeping on the radar for possible opportunity going forward absolutely especially if you're interested in playing the semi is that all these are gonna be companies that are that are definitely on your radar I just think when you're debating okay should I play the semi should I get back into something like Sox or should I maybe look for an individual stock I think you'll see that that's something like maybe a Broadcom is gonna be a better option right now and I think part of the story with broad camp Broadcom we're gonna take a look at the one-year chart but part of the story also is this stock had had struggle it probably benefited less from this this semi supercycle as it struggled for growth a little bit more we knew about its kind of hostile bid to take over Qualcomm that was obviously a way to go out and buy growth that that failed and so there's there's there's definitely been some specific considerations here but just looking at the two things that we've been looking at here for Broadcom I think right now the picture looks a little bit better and with that set I can go ahead and look at the one-year chart with the 50-day and the 200-day drawn on completely different story for Broadcom AVG o as the ticker here yes whipping up and down but it bottomed out back here in the summer of 2018 and has really it's been making on higher lows since that and in December really actually rallied in December while the rest of the market was selling off we now see it here well above the 50 in the 200-day the 200-day in the December rally acted as a nice line of support and it rallied hard off of that so that's probably an encouraging trend if those are the only things you're looking at but what's even better than that is that the earnings trend is also looking a lot healthier just for 2019 alone we're seeing for positive revisions in the last 60 days just one negative revision there in the last 30 days the exact consensus for excuse me sorry we got the fiscal years a little bit different so we should probably look here there's a consensus for the fiscal year ending in October 2019 well up on a bunch of positive revisions outweighing the negatives and then looking ahead even better than that current fiscal year the EPS growth is expected to come in at nine point seven percent so again you know the Texas Instruments current fiscal year is supposed to come in at 30% growth as I'm saying though there are some individual considerations about where that growth is coming from but then looking beyond that broad comes next fiscal year top of that gonna be 15% earnings growth based off of these are early estimates and then as I said the the dividend yield and the value case this is trading at just 11 times earnings right now even though it has rallied so strongly over the past several months and it's yielding four point two percent so both of these stocks are two of the largest holdings in terms of weight in the Sox ETF we were looking at earlier both of them bellwethers for the broader semiconductor industry of course both of them have their own individual considerations their their own growth catalysts and potentially that their own segments that that that they lead in but when you look at the very basic beginnings of an investment thesis and you're looking at the share price trends and things like the 50-day moving average and the 200 day moving average and then combining that with the earnings picture I like what I'm seeing from Broadcom right in this very moment a little bit better than what I'm seeing from Texas Instruments and do you own them I have no position in either any of these including the Sox fund both personally and in the income investment portfolio okay interesting information as always whatever else is interesting that Ryan is involved with is and if you want to hear more technology talk this is what you should be looking for on the podcast page of Zacks comm it's a program that he hosts and produces called Tech Talk Tuesday and also his other streaming video program free lunch Monday through Thursday on most major streaming platforms two very interesting programs that Ryan's involved with and that he produces and hosts and a lot of interesting information in a lot of areas in each of those with Ryan I'm Terry Ruffolo you
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