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Stock Strategist

Why You Should Buy When the Chips Are Down

We highlight which semiconductor stocks are attractive and which to avoid.

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Semiconductor stocks are in full retreat. The Philadelphia Semiconductor Sector Index has fallen more than 20% in the past three months. Competitive pressure and  Microsoft's (MSFT) delay in launching its Vista operating system have pushed chip industry titan  Intel (INTC) down about 30% from its 2006 high. Despite its dominance in chips for wireless handsets,  Texas Instruments (TXN) also has seen its stock trading down with the sector. We believe that in some cases the market has thrown out the baby with the bath water and, for investors with a long-term view, this creates buying opportunities.

Our Approach
Let us first step back and talk about the challenges in picking chip stocks and how our approach can help long-term investors avoid some common pitfalls.

Larry Cao does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.