Texas Instruments Zigging When Others Zag

Texas Instruments (TXN) is a well-respected name in the semiconductor sector, and not unlike Broadcom (AVGO), TI management has earned that respect with sound management practices and a willingness to break away from the “growth above all” philosophy that has often dominated the space. While I thought TI was overvalued back at the time of fourth quarter earnings, the stock has more or less tracked the SOX index since then.

Not everybody is going to agree with it, but TI is once again showing a willingness to break from the pack during this downturn. Learning lessons from prior downturns, when unexpected recoveries in demand caused production difficulties and headaches for customers, TI is choosing to invest in inventory and keep production levels relatively high. If this strategy pays off (particularly if there’s a more V-shaped recovery in TI’s markets), TI could gain share at the expense of rivals that don’t have the balance sheet to do this.

The relative valuation is a little better here now, but still not at a level that I’d say is a clear-cut buy, and I’d still prefer Broadcom (which I own) at these prices.

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Texas Instruments Zigging When Others Zag