Semiconductor stocks are worth buying on any weakness, portfolio manager John Petrides told CNBC’s “Trading Nation” on Thursday.
“My team in particular is in a buy-the-dip mentality for the overall equity market,” said Petrides, who works in Tocqueville Asset Management’s wealth division.
“We would further that to buy the chip dip when the semiconductors, the chip stocks, do sell off because the long-term fundamentals are quite strong.”
Though the global chip shortage has raised concerns about the group’s near-term prospects, the rise of 5G, autonomous vehicles and other industries that rely on chips paints a rosier long-term picture, Petrides said.
“If those companies can pass through pricing, it’s going to be a home run for those individual chip stocks,” he said. “You’re going to have this massive inventory restocking, in my opinion, for companies who don’t want to get caught short on inventory again … which is going to elongate the demand cycle for the chips.”
With Taiwan Semiconductor delivering solid third-quarter earnings tied to chip shortage-related demand, the entire space could be setting up for a welcome windfall this reporting season, Joule Financial’s Quint Tatro said in the same interview.
“A lot of these stocks have been punished. There’s, I think, finally some value here,” the firm’s chief investment officer said.
“We were not chasers of these stocks on the way up, but … from a trading perspective, you have to look and see what has really been strong and go with what could be the future leaders, and that leads us to AMD [Advanced Micro Devices].”
Though the stock is expensive, trading at a more than 41 times forward price-to-earnings multiple, its relative strength and the company’s ability to pass price hikes onto its customers could become important catalysts, Tatro said.
“If we see this uptick in earnings due to these abilities to pass the prices onto consumers, I think this could, in the rearview mirror, look like a cheap stock here,” he said. “If we just return to the multiples, with increased earnings, that we saw six, nine months ago, these stocks are going a lot higher.”
Disclosure: Quint Tatro and Joule Financial own shares of Advanced Micro Devices.
