When it comes to semiconductor stocks, patience will pay off, says C.J. Muse, managing director of Barclays Capital.
"Inventories will be depleted in the first quarter," he said, adding that Barclays expects this slow start to precede growth for the year from flat to 4 percent across the sector.
For now, stick with equipment stocks, says Muse, where a different business cycle means inventories aren't an issue, and an overall market lift should carry equipment.
Muse likes equipment makers Lam Research, and Teradyne .
"For the next two-plus months we're looking for earnings surprises from equipment and earnings cuts for the semiconductor names."
But as soon as inventories start to roll in, Muse is betting on semiconductors: Qualcomm, Broadcom, Micron Tech, and Altera.
Semiconductor giant Intel is not on this list, despite a pop in the stock late December. "We see the Windows 8 push heading into [the third quarter], impacting PC demand particularly for microprocessors" like Intel, says Muse.
The third-quarter release of the latest Windows operating system could drive higher PC sales once consumers upgrade their hardware to be more compatible with the new software. This stands to benefit the chipmakers, like Intel, whose component microchips are in the PCs.
For this reason, Barclays revised its expectations for Intel, saying it expects earnings to be lower in the first half of 2012 than in the second half.
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C.J. Muse does not own stock in the aforementioned companies but Barclays Capital has an investment banking relationship with Broadcom, Qualcomm and Lam Research.