Microchip Technology Already Trading On The Recovery-To-Be

Investors have been seemingly chomping at the bit all year to buy a semiconductor rebound that has yet to happen. Of course investors look to get early (the market is a discounting mechanism, after all), but it seems like "oh, next quarter it will turn around" is all that investors have needed to hear. To that end, while my relative value call that Microchip Technology (MCHP) wasn't a great candidate to buy back in May has mostly worked out - the SOX has outperformed by about 10% and my favored name, STMicro (STM), has outperformed by much more - the shares are still up almost 15% from that last article (beating the market).

Although Microchip's business is finally turning (after six consecutive quarters of downward guidance revisions), and this is a very profitable and very diverse chip company, I can't say I love the valuation. Anticipatory buying has already taken a lot of semiconductor share prices higher, leaving investors to either rationalize higher fair values, accept lower returns, or cast about amongst the more troubled stories.

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Microchip Technology Already Trading On The Recovery-To-Be