Two “Defensive” Tech Stocks For Your Portfolio
- Posted by Tech Insidr
- on August 8th, 2011
During these volatile market conditions, simply maintaining your capital is one of the toughest challenges. The NASDAQ index has shed 8.13% in the last 5 trading sessions and tech stocks are feeling the brunt of this global sell off. In this challenging climate, savvy investors typically shift gears from growth mode to risk management mode.
When volatility picks up and panic-induced selling takes hold, I typically make some “defensive” move to my portfolio to protect against any further losses. High growth firms are usually prone to multiple contractions during a sell off, so you must pick your poison wisely.
So what high quality tech stocks can help you shore up your portfolio during this correction?
RBS semiconductor analyst Didier Scemama markets recently came out with a research note listing two of his favorite “defensive” semiconductor stocks.
Scemama argues chip equipment maker ASML Holdings NV ($ASML) and ARM Holdings ($ARMH) are the “most defensive names in the sector.” ASML shares trade at about trough values of price to book, historically speaking, and ARM has a strong balance sheet and a high-quality franchise, in his view.
- Tiernan Ray, Barons Tech Trader Blog (source)
ARM Holdings provides the intellectual that power nearly every mobile device in the world and they are rapidly expanding into the PC realm with the release of Windows 8 for ARM. Obviously, mobile computing is a huge trend as more individuals shift to smartphones and tablets.
ARMH is definitely at the forefront of this revolution and stands to benefit as the global smartphone penetration rate increases. Outside of this core area, ARM’s innovative chip designs have spawned an entire eco-system of derivatives including Qualcomm’s Snapdragon CPU ($QCOM) and nVidia’s Tegra 3 GPU ($NVDA).
ASML Holdings is another firm which enables CPU innovation through their manufacturing technologies. Essentially, ASML provides the tools that Intel or AMD uses to fabricate their processors. With their technology leadership, ASML is currently the top supplier for the next generation manufacturing technologies (11nm and below). A single tool can cost as much as $20M, so obviously this is a very good competitive spot to be in.
In the past 10 years, the innovation in CPUs is almost unparalleled – today CPUs are faster, packed with tons of features, and draw far less power than last-generation CPUs. These advancements in processor technology are simply not possible without contributions from firms like ASML.
Source: Barons Tech Trader Daily Blog.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Rob a.k.a. Techinsidr has been trading stocks and following the stock market since 1997. He formerly worked at Intel Corporation in a Financial Analyst role, responsible for overseeing an annual budget of $160M... More »