These are the riskiest stocks in the market today.
I realize they have everything going for them. Rising earnings, years of major growth ahead, and they’re going to be the essential to making the technological innovations in the next few years possible.
However, they’ve also done really well over the last few years.
Probably too well.
The way it looks, if this correction gains more steam, these stocks could get hit especially hard.
And, to be clear, I really hope they do.
What Goes Way Up...
Semiconductors have been on fire.
Semiconductors are the chips that power every bit of technology in our daily lives.
They’re basically the brain in your computer, phone, and car.
And as time goes by, they’ll be managing everything from refrigerators to robotic pizza makers to helping you find your luggage at the airport.
That means a lot more semiconductors. Exponentially more.
As you might expect, the stock market has largely anticipated all this.
Semiconductor stocks, which are tracked mainly by the Philadelphia Semiconductors Index (tracked under the symbol SOX), have recently hit their highest levels in over a decade.
In fact, they’re only about a 20% upswing away from hitting their all-time highs during the tech bubble.
It has taken 15 years, but these stocks, which include Texas Instruments (TXN), Intel (INTC), and Qualcomm (QCOM), have finally lived up to the potential they had back in 1999.
Given the top tech trend, they have a lot more potential too.
However, at the moment, they are facing extreme risks.
And that’s a good thing.
...Must Come Down
The Philly Semiconductor Index has shot 45% higher in the last year.
The run caps a total run of about 300% since the credit crisis.
That’s a near biotech-level type of run.
It’s been good, but it also may be very bad in the short run.
The current “correction” has caused the S&P 500 to dip by about 2%.
Semiconductor stocks, meanwhile, have dropped 7% over the same time period.
That’s never a good sign and why it’s time to start targeting these stocks now.
If the correction should worsen, there’s a real probability semiconductor stocks could get slammed.
If they do, it may be the last great time to buy them because they’re gearing up for major growth.
Take a look at Applied Materials (AMAT) to see what’s going on in semiconductors now.
Applied Materials is a company that makes equipment used to make semiconductors.
It’s basically the “picks and shovels” of the semiconductor business.
It recently released its latest financial results and we got a great insight into the future of these stocks.
Now, the overall numbers weren’t exciting for Applied Materials. Revenues and net earnings were a bit below expectations.
However, the company revealed its order backlog rose 20% from a year ago to more than $4 billion.
That’s a clear sign semiconductor companies are gearing up for the next big upswing.
Normally, I’m not into buying dips.
This one, if it gets bad enough, will be a definite exception.