Analog Devices Remains Well-Run And Well-Placed To Grow

Even when you’re talking about the best of the best, valuation still matters. While I liked the quality of Analog Devices (ADI) and its differentiated growth drivers a year ago, I wasn’t so fond of the valuation. Since then, the shares have given investors a roughly 15% return, which is better than the return of the S&P 500 over that time, but well below the 40%-return of the semiconductor sector (as measured/reflected by the SOX index).

My main concern today is that the sector (and the market in general) has come back too far too quickly, leaving the risk/reward balance skewed more to the downside, and particularly if the Covid-19 recession proves to be deeper and/or longer than expected. I still really like Analog as a company, though, and I’m excited by the company’s specific growth drivers and growth opportunities, as well as its high-quality management. Valuation makes it hard for me to call this anything more than a hold, but I suppose if I had to own an expensive analog chip stock, this would be my preferred pick.

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Analog Devices Remains Well-Run And Well-Placed To Grow