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A DIY Portfolio To Beat SOXX – 12 Semiconductor Superstars

June 20, 2024

This chart of the iShares Semiconductor ETF tells a vivid story of the progress of the technology boom. Not seen is the Internet bubble of the late 1990s which burst in 2001. Adjusted for share splits shares in Amazon fell from $5.60 to 28 cents, a fall of 95pc.

This left a massive hangover as shown on this chart where the ETF was rangebound for 12 years from the beginning of the new millennium to 2012. It then soared with the cloud boom as technology shares moved from the old model of software packages and paid for upgrades to a subscription model where subscribers always had the latest model and entry costs were low.

Then came an interruption as the aftermath of the massive quantitative easing that accompanied the Covid lockdowns was followed by a spike in inflation and interest rates still working its way through the system.

Even before interest rates began to fall the bull market resumed but the drivers differed. This bull run is all about GenerativeAI. According to Michael Dell of Dell Technologies, it is moving 10x as fast as previous booms and we are still at the dawn of this new era.

Many investors worry that we are in bubble territory but bubbles are impossible to detect except in retrospect. One man’s bubble can be another man’s boom. I am in the boom camp. GenAI and its implications are not a passing fan but a development of historical significance and where humanity is going with this is still mostly a mystery.

This new bull run could be both explosive and long-lasting and semiconductors are at the heart of the action. Below are the top 30 shares in the New York Semiconductor index.

There are 30 stocks in the list but the ones I like the most are 12. These are all fabulous businesses, all 3G, with spectacular charts, great growth, great stories and a massive ‘something new’ in the form of GenAI, which I believe is a story which will run and run.

In broad terms, the history of the entire post-war period is of an accelerating technology boom which has driven an equally spectacular and sustained rise in US share prices. It is a great time to invest in US equities, arguably the best time ever.

Many investors, horrified by political developments in the developed world, ranging from a swing to the far right in Europe, the prospect of a landslide Labour majority in the UK accompanied by the near-total collapse of the Conservative party and a presidential battle in the US which is like an episode of Last of the Summer Wine, understandably feel that things are getting worse. But they are not. On the contrary, the global economy may be entering a golden age and shares could be on the brink of a legendary bull market.

Sales and earnings are important for share prices but so is news flow and the news flow that is coming, driven by a tsunami of spectacular technological advances and giant research budgets, is likely to be off-the-scale exciting.

So here are my 12:

Share Recommendations

ASML Holdings. ASML. Buy @ $1,061

Analog Devices. ADI. Buy @ $233

Taiwan Semiconductor Manufacturing. TSM. Buy @ $182

Broadcom. AVGO. Buy @ $1804 (ahead of 10:1 share split)

KLA Corporation. KLAC. Buy @ $866

Lam Research Corporation. LRCX. Buy @ $1098

Applied Materials. AMAT. Buy @ $249

Monolithic Power Systems MPWR. Buy @ $852

Nvidia NVDA. Buy @ $140

Micron Technology. MU. Buy @ $157

Amkor Technology AMKR. Buy @ $40.5

Arm Holdings. ARM. Buy @$172.5 (not in the SOXX holdings list but I like it)

Strategy – A Portfolio to Outperform SOXX

Semiconductors in the 21st century are like flints to Stone Age man. Almost nothing could be achieved without them and their impact was transformational. Buy these 12 shares, with or without leverage, and I believe you will do very well.

Further reading

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