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Jan. 18, 2020, 12:01 p.m. EST

This U.S. company will benefit as China tries to catch up in semiconductors

In an attempt to reduce dependence on the U.S., China is likely to ramp up its semiconductor manufacturing and design capabilities

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By Nigam Arora

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• The chart shows that the volume is low. This is a negative.

• In the stock market, Applied Materials has significantly outperformed the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -4.06% , Nasdaq 100 ETF /zigman2/quotes/208575548/composite QQQ -3.44%  and S&P 500 ETF /zigman2/quotes/209901640/composite SPY -2.98% .

• Applied Materials is a 5G stock. (Please see “How and when prudent investors ought to buy these 5G stocks.”)

Ask Arora: Nigam Arora answers your questions about investing in stocks, ETFs, bonds, gold and silver, oil and currencies. Have a question? Send it to Nigam Arora.

How and when to buy

Those who are nimble may want to wait for a breakout above the resistance line shown on the chart and buy into the strength with a tight stop. Since this is a long-term position in The Arora Report’s portfolio, we will likely start a trade-around position for a shorter time frame on a breakout. We will provide a stop zone, target zone and appropriate position size. All investors should use trade-around positions. This technique can often double returns and reduce risks.

For those who are not nimble, it may be prudent to wait for a dip in the Arora buy zone to start a long-term position. Please see “Extreme greed in the stock market is producing a bad setup as earnings season starts.”

More tech stocks

Other semiconductor-manufacturing stocks that may benefit include Lam Research /zigman2/quotes/208077897/composite LRCX -7.34% , KLA Corp. /zigman2/quotes/209248041/composite KLAC -5.02% , Kulicke and Soffa Industries /zigman2/quotes/200795669/composite KLIC -6.79% and ASML Holding /zigman2/quotes/210293876/composite ASML -8.44% . Semiconductor-testing stocks such as Teradyne /zigman2/quotes/208321188/composite TER -4.63% may also benefit.

Here are additional semiconductor stocks in the Arora Report portfolio that will benefit.

• Intel /zigman2/quotes/203649727/composite INTC -5.71%

• Mellanox /zigman2/quotes/202453629/composite MLNX -0.59% . Mellanox is in the process of being bought by Nvidia /zigman2/quotes/200467500/composite NVDA -1.75% .

• Micron Technology /zigman2/quotes/205710729/composite MU -2.92%

• Maxim Integrated Products /zigman2/quotes/201861354/composite MXIM -5.22%

• NXP Semiconductors /zigman2/quotes/202999625/composite NXPI -9.38%

• Qualcomm /zigman2/quotes/206679220/composite QCOM -3.46%

• Qorvo /zigman2/quotes/209919828/composite QRVO -3.35%

• Semiconductor ETF /zigman2/quotes/200571902/composite SMH -5.53%

• Western Digital /zigman2/quotes/204213617/composite WDC -4.61%

• Xilinx (XLNX) /zigman2/quotes/209389378/composite XLNX -6.30%  

Among large-cap tech stocks, Apple /zigman2/quotes/202934861/composite AAPL -4.14%  is the major beneficiary of the trade deal. Segmented money flows are the best tool to give investors an edge in stocks like Apple. (Please see “Something rare is happening among popular technology stocks.”)

Disclosure: Subscribers to The Arora Report may have positions in the securities mentioned in this article or may take positions at any time. <INTERNAL-PAGE URL="/author/nigam-arora">Nigam Arora</INTERNAL-PAGE> is an investor, engineer and nuclear physicist by background who has founded two Inc. 500 fastest-growing companies. He is the founder of The Arora Report, which publishes four newsletters. Nigam can be reached at Nigam@TheAroraReport.com.

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21,636.78
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March 27, 2020 5:12p
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Nigam Arora is an engineer, nuclear physicist, author, and entrepreneur and the founder of two Inc. 500 fastest growing companies. He is also the developer of the ZYX Change Method to profit from change by investing. The premise is that most money is made by predicting change before the crowd. Arora is the chief investment officer at The Arora Report and the editor of four newsletters that track the ZYX Change Method. Nigam can be reached at Nigam@TheAroraReport.com

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