Chip stocks rise from the dead

The semiconductor sector has sprung back to life during this rally, and one stock in particular is still worth buying aggressively.

By Jim Cramer Sep 29, 2010 8:46AM

jim cramerBy Jim Cramer, TheStreet


The semiconductor group had been among the most hated in the market. I know it, not just because of the myriad downgrades and give-ups but because when I go on Twitter to read responses to my posts and the articles I write, I see the criticism, including lots of people claiming you can't buy these stocks in September.


Of course it was tough to be more wrong than that. The Semiconductor HOLDRS (SMH) went from $24.20 to $27.60 in that period, and the Philadelphia Semiconductor Index (SOX) rallied from 307 to 347. Just a huge and bountiful takeoff. Of course I received a huge round of apologies for the flaming I took. Oh, wait, no, I didn't; that almost never ever happens. Particularly with many of the Web cretin critics.


But you have to marvel at all of the people who gave up on Intel (INTC) at $17-$18 or hated Texas Instruments (TXN) at $25 before this juicy breakout and pooh-poohed Altera (ALTR) as a company with no momentum or said that Nvidia (NVDA) would never get past 10. TriQuint (TQNT) and RF Micro (RFMD) were left for dead, roadkill, and now they are doing cartwheels.


It's pretty clear that the sentiment has changed, and if you listen to Best Buy (BBY), you might think that the consumer has, too. It's pretty obvious from the retail stocks that September ended up being a pretty strong month for the consumer, and some of that money was definitely spent on gadgets that needed chips. Far more important, however, is that the group got oversold as many of the last holdout analysts downgraded the stocks after the Intel preannouncement.

The move is so pronounced that there's not much left to play catchup with. That said, I believe that Xilinx (XLNX) -- which has a great product portfolio, fabulous management, a nice dividend and a perfect balance sheet -- could still rally back to old highs, not unlike its oft-thought-of sibling Altera. If you are looking for the best story in the group that is unrecognized -- as opposed to many of the others mentioned above, as well as Microchip (MCHP) and Cirrus Logic (CRUS) -- Xilinx might fit the bill.


I would buy it aggressively here.


At the time of publication, Cramer was long Intel.


Jim Cramer is co-founder and chairman of TheStreet. He contributes daily market commentary for TheStreet's sites and serves as an adviser to the company's CEO.


Click here to follow Cramer's Charitable Trust trades.


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