TCS Daily

In the Chips

By James K. Glassman - June 26, 2000 12:00 AM

Semiconductors are the brains inside every digital device, whether it's a PC or a wireless phone. So if you're investing in technology, it makes sense to have some semiconductor stocks in your portfolio. The king of computer chips is of course Intel, which makes the microprocessors that power many of the world's personal computers, and an increasing number of servers - large computers used to manage websites and corporate networks. The company is also moving aggressively into web services for corporations and mobile computing applications. Intel (INTC) is a Glassman Tech Top 30 company and if you're a long-term investor, there's probably never a bad time to buy stock in this great firm.

What other chip stocks are worth a look? Prudential Securities maintains an Equity Select List - a list of the 20 or so stocks that Prudential believes are the best buys in the stock market. Right now, Pru has several chipmakers on the Equity Select roster. Anadigics (ANAD) makes gallium arsenide chips, used in wireless, cable, and optical fiber communications networks. Texas Instruments (TXN) also makes the list, thanks in part to its first quarter earnings, which increased 69% over last year. Texas Instruments makes digital signal processors (DSPs), chips which are used in wireless phones and computing devices.

If you want to get a little European exposure with your chips, you might consider ST Microelectronics (STM), a French company which makes various kinds of semiconductors and is also being touted by Prudential. And if you're a bargain-hunter looking for a huge company that has stumbled of late, you might consider Motorola (MOT), which makes chips and other equipment for all kinds of telecommunications needs.

Speaking of possible value plays, and looking now outside of Pru's Select list, National Semiconductor (NSM) traded at a recent $68.25 per share, representing a very reasonable 21 times earnings. If you're looking for more of a growth stock, and you're willing to stomach a lot of volatility, you might consider Nvidia (NVDA). Nvidia makes the 3-D graphics chips that will be included in the X-Box, Microsoft's much-anticipated entry into the video game market.

Finally, Agilent (A), the former testing-and-measurement division of Hewlett-Packard, makes only part of its money from the sale of chips, but this firm makes so many products related to high-speed digital networks that it should be considered by any technology investor.

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