Investors are trying to figure out how to trade chips after two major firms downgraded semiconductor stocks.
Both Benchmark and S&P Capital turned cautious, largely both firms say the tech sector is vulnerable to short-term profit-taking after the outperformance year to date.
If you’re a trader, you may want to heed those words of caution. Top analyst Craig Berger of FBR tells us that the sector is probably due for a bit of a sell-off.
However, if you’re an investor he says the fundamentals still look very strong. “We’re still very early in the semiconductor up-cycle which should play out over the next nine months,” he said.
He goes on to say, even though semis have already had a big run, “I’m looking for 475 on the Sox before the end of the year."
What would be a catalyst to drive such big gains?
Berger and the Fast traders all point to new gadgets from Apple that could be “must haves” for the tech faithful around the globe.
Although you could play the thesis long the semiconductor index, Berger tells us a handful of chip stocks are more levered to Apple. They are:
Qualcomm
Broadcom
Skyworks
Cirrus Logic
Top Trader Jon Najarian agrees with the thesis.
Although he likes all the stocks long-term, he tells us as a trader right now, he’d play the Apple ecosphere with SWKS, BRCM, and ARM . Although he also likes Qualcomm, at current levels he feels the stock is ahead of itself.
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Trader disclosure: On Feb 13, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Najarian is long AAPL; Najarian is long GS; Najarian is long GOOG; Najarian is long HD; Najarian is long TEX; Najarian is long CME; Grasso is long NUAN; Grasso is long S; Grasso is long XLU; Weiss is long HK; Weiss is long EUO; Weiss is long WLP; Weiss is long UGL; Weiss is long BKU; Weiss is short MT; Weiss is short BTU; Weiss is short AAPL puts; Weiss is short AMZN puts
For Steve Grasso
Stuart Frankel & Co and its partners own CSCO
Stuart Frankel & Co and its partners own HPQ
Stuart Frankel & Co and its partners own MU
Stuart Frankel & Co and its partners own P
Stuart Frankel & Co and its partners own ZNG
For Brian Kelly
Kelly is long SPY puts
For Colin Gillis
(AAPL) Investment banking (next three months): BGC Financial LP and/or its affiliates, expect to receive, or intend to seek, compensation for investment banking services within the next three months from all of the companies referenced within this report.
Lead or Co-manager: BGC Financial LP and/or its affiliates, has not acted as lead or co-manager in a public offering of equity and/or debt securities for Apple within the last 12 months. BGC Financial LP and/or its affiliates has not received compensation for investment banking services in the last 12 months from Apple.
For Floyd Wilson
No disclosures
For Craig Berger
FBR has received compensation for non-investment banking securities related services from this issuer as a client in the past 12 months: MRVL
As a client of FBR, the issuer receives non-investment banking, securities related services: MRVL.
FBR acts as a market maker or liquidity provider for the company's securities: NVDA, AMD, ATML, BRCM, FCS, INTC, IRF, LLTC, LSI, MRVL, MSCC, MXIM, ONNN, QCOM and SLAB.
CNBC.com with wires.
