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Analyst Watch: Can Semis Continue Growth?

Tuesday, 6 Jul 2010 | 8:04 AM ET

U.S. stock index futures were higher ahead of the open Tuesday in the wake of sharp declines for the major indexes in the previous week as investors returned from an extended weekend.

Here's what guests on today's Squawk on the Street are watching before the opening bell:

Chip Sales

Global chip sales figures for May showed a 4.5 percent increase. The question now is, can the strong recovery seen in this sector during the first five months of 2010 continue? Historically, the early months of the calendar year are not especially robust, but sales for the first four months of 2010 were the highest on record for the industry.

Doug Freedman, senior semiconductor analyst for Gleacher & Company, is very bullish on the sector right now. In particular, he notes:

  • Semi stocks haven't reflected the success of the industry in improving their profitability
  • Business models are far more profitable for these companies than the markets seem to recognize
  • Semi stocks have pulled down with the broader market
  • When the market rallies, semis tend to lead. The relative valuation for semis is the lowest it has been in years; and
  • Selling prices are holding up well, with little price competition in the market

His top picks are:

Intel

Advanced Micro Devices

Analog Devices

OmniVision Technologies

Linear Technology

See more of what these and other analysts and money managers have to say, and get the latest financial news. Watch Squawk on the Street every weekday morning starting at 9 a.m. ET.

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