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New Affection for 3 Unloved Chips Stocks

Wednesday, 4 Jan 2012 | 6:07 PM ET

If you’re an investor who's drawn to sectors that are unloved, chances are you’ve got semi’s on your radar.

Over the past year the XSD, the ETF that tracks semiconductors is down about 20%.

Are these stocks about to play a game of catch up?

According to top strategist Dan Niles of Alpha One -- kinda’. He ‘does’ see catalysts that should drive buyers.

Time to Get Bullish on Semis?
Semiconductor stocks were down 12% in 2011, so is this the year to turn bullish on the sector? Daniel Niles, Alpha One Capital Partners, discusses where he sees opportunities.

They include:
- potential earnings bottom in Q1 2012
- bad news already reflected
- orders are starting to turn
- increase disk drive capacity

However, he thinks investors need to play the space selectively. He recommends 3 names; long Marvel, Teradyne , and LSI.

“They are all levered to hard disk drives,” he says and with rival Seagate preannouncing to the upside he thinks all 3 companies deliver unexpected strength.

“Revenues are all down double digits but as capacity gets built back up in Thailand – all three of those companies (mentioned above) should see business improve dramatically – just as it fell off during the floods.”

And if you’re a more advanced trader, Niles suggests hedging long positions in these names against short positions in industrial and consumer stocks. Although he doesn’t give us names, he does tell us, “we’re looking at broadly diversified companies in Europe and the hotel related names exposed to Europe.”







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Trader disclosure: On Jan. 4, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: Terranova owns APC; Terranova owns OXY; Terranova owns XOM; Terranova owns VRTS; Terranova owns IBM; Terranova owns CSCO; Terranova owns AXP; Terranova owns SBUX; Terranova owns CSX; Terranova owns SWN; Terranova owns AXP; Najarian is long AAPL; Najarian is long BAC calls; Najarian is long C; Najarian is long JPM calls; Najarian is long WFC calls; Najarian is long INTC; Najarian is long YHOO; Najarian is long GE; Najarian is long INTC; Najarian is long MSFT; Najarian is long COP; Najarian is long MOS; Finerman owns AAPL; Finerman owns BAC; Finerman owns JPM; Finerman owns IBM; Finerman owns M; Finerman owns TGT; Finerman owns WMT; Finerman owns MSFT; Seymour is long AAPL; Seymour is long BAC; Seymour is long CSCO; Seymour is long GE; Seymour is long INTC; Seymour is long MON

Brian Stutland
Stutland Equities holds hedged positions in VIX futures and options
Stutland is short NFLX, short puts, long stock
Stutland is long BP and short calls
Stutland owns AAPL
Stutland owns COP
Stutland owns KO
Stutland owns YUM
Stutland owns MSFT
Stutland owns GE
Stutland owns BP
Stutland owns T
Stutland owns INTC
Stutland owns DIA
Stutland owns KMP
Stutland owns ABT
Stutland owns AMGN
Stutland owns CTRP
Stutland owns PG
Stutland owns QSII
Stutland owns CSCO
Stutland owns DBA
Stutland owns EWZ

MacNeil Curry
No disclosures

Dan Niles
Alpha One Capital owns LRCX
Alpha One Capital owns LSI
Alpha One Capital owns TER
Alpha One Capital owns MRVL

Gene Munster
The following companies have been investment banking clients of Piper Jaffray during the past 12 months: ACOM, DANG, DRIV, MOBI, YNDX, YOKU
Piper Jaffray makes a market in the securities of the following companies, and will buy and sell the securities of these companies on a principal basis:
AAPL, ACOM, AMZN, BIDU, DANG, DRIV, EBAY, GOOG, IACI, LOGM, MCHX, MELI, MOBI, PRTS, RLOC, SINA, SOHU, VCLK, WWWW, YHOO, YNDX, YOKU

Deborah Weinswig
An employee of Citigroup Global Markets or its affiliates is a trustee of Target Corp.
Gregory Hertz, CFA, CPA, Associate, holds a long position in the securities of Wal-Mart Stores Inc.
Leo Kulp, CFA, Analyst, holds a long position in the securities of Wal-Mart Stores Inc.
Citigroup Global Markets Inc. or its affiliates beneficially owns 1% or more of any class of common equity securities of JC Penney Co Inc. This position reflects information available as of the prior business day.
Within the past 12 months, Citigroup Global Markets Inc. or its affiliates has acted as manager or co-manager of an offering of securities of Dollar General Corp., Target Corp, Wal-Mart Stores Inc.
Citigroup Global Markets Inc. or its affiliates has received compensation for investment banking services provided within the past 12 months from Dollar General Corp., Kroger Co, Target Corp, Wal-Mart Stores Inc.
Citigroup Global Markets Inc. or its affiliates expects to receive or intends to seek, within the next three months, compensation for investment banking services from Wal-Mart Stores Inc.
Citigroup Global Markets Inc. or an affiliate received compensation for products and services other than investment banking services from CVS Caremark Corp, Dollar General Corp., JC Penney Co Inc, Kohl's Corp, Kroger Co, Macys Inc, Safeway Inc, SUPERVALU INC, Target Corp, Walgreen Co, Wal-Mart Stores Inc, Costco Wholesale Corp in the past 12 months.
Citigroup Global Markets Inc. currently has, or had within the past 12 months, the following as investment banking client(s): Dollar General Corp., Kroger Co, Target Corp, Wal-Mart Stores Inc.
Citigroup Global Markets Inc. currently has, or had within the past 12 months, the following as clients, and the services provided were non-investment-banking, securities-related: CVS Caremark Corp, Dollar General Corp., JC Penney Co Inc, Kohl's Corp, Kroger Co, Macys Inc, Safeway Inc, Saks Inc, SUPERVALU INC, Target Corp, Walgreen Co, Wal-Mart Stores Inc, Costco Wholesale Corp.
Citigroup Global Markets Inc. currently has, or had within the past 12 months, the following as clients, and the services provided were non-investment-banking, non-securities-related: CVS Caremark Corp, Dollar General Corp., JC Penney Co Inc, Kohl's Corp, Kroger Co, Macys Inc, Safeway Inc, SUPERVALU INC, Target Corp, Walgreen Co, Wal-Mart Stores Inc, Costco Wholesale Corp.
Citigroup Global Markets Inc. or an affiliate received compensation in the past 12 months from Dollar General Corp..
Analysts' compensation is determined based upon activities and services intended to benefit the investor clients of Citigroup Global Markets Inc. and its affiliates ("the Firm"). Like all Firm employees, analysts receive compensation that is impacted by overall firm profitability which includes investment banking revenues.
The Firm is a market maker in the publicly traded equity securities of CVS Caremark Corp, Macys Inc, Costco Wholesale Corp.

Matthew Lamphier
First Eagle US Value Fund is long CSCO
First Eagle US Value Fund is long MSFT
First Eagle US Value Fund is long INTC
First Eagle US Value Fund is long LLTC
First Eagle US Value Fund is long TXN
First Eagle US Value Fund is long BB&T
First Eagle US Value Fund is long USB
First Eagle US Value Fund is long CINF
First Eagle US Value Fund is long BK
First Eagle US Value Fund is long AXP
First Eagle US Value Fund is long V
First Eagle US Value Fund is long MA
First Eagle US Value Fund is long BRK/A
First Eagle US Value Fund is long WRB

Greg Zuckerman
No disclosures

CNBC.com with wires.

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