The major indices are retesting the breakout from October as selling pressure has intensified in recent days. The Nasdaq, S&P 500 and Dow Jones Industrial Average have all touched down between 5-8% from their November peaks.
The VIX Index, commonly referred to as the ‘Fear Gauge’, has spiked more than 100% over the last month. The VIX generates a 30-day forward projection of volatility. It is derived from the prices of SPX index options and represents expectations for short-term price changes in the S&P 500.
In other words, the market is expecting price ranges to widen in the near-term, which is a common theme when stocks are falling. While not always the case, normally volatility is low or trending lower as stocks rise and typically trends higher as stocks fall. The old market adage speaks to this - stocks take the stairs up and the elevator down.
Over the past year, spikes in the VIX have represented solid opportunities to buy as volatility hasn’t remained elevated for too long. Looking at the 2021 return of the VanEck Vectors Semiconductor ETF (SMH - Free Report) , you wouldn’t realize that volatility had spiked so drastically in the past month and that many stocks were in bear market territory:
The VanEck Vectors Semiconductor ETF has doubled the Nasdaq’s performance this year with a return of 39%. SMH contains 25 of the top semiconductor holdings, including two of the three leaders we will discuss below. All three companies are part of the Zacks Semiconductor – Analog and Mixed industry group, which is ranked in the top 7% of all 254 industries. This industry group has outperformed this year with a return of over 34%. Historical studies have shown that about half of a stock’s future price appreciation is due to its industry grouping.
The relative outperformance of this industry group, particularly during a time of heightened volatility, is a clear sign that these stocks are in high demand. When emerging out of market corrections, normally the stocks that held up the best lead the leg back up.
While semis have advanced significantly this year, the ongoing supply constraint issues will continue into 2022. The three companies below likely still have room to run. Remember – leaders lead.
ON Semiconductor Corp. (ON - Free Report)
On Semiconductor is a supplier of standard semiconductors and power management integrated circuits used in various devices such as high-speed fiber optic equipment and portable electronics. Headquartered in Phoenix, AZ, ON provides data flow management for precision computing and communications systems, as well as power management for distributing and monitoring the supply of power within electronic devices.
Sporting a Zacks #1 rank (Strong Buy), ON has exceeded earnings estimates in each of the last six quarters. The company most recently reported earnings of $0.87, a 17.6% surprise over estimates. Over the last four quarters, ON has produced an average earnings surprise of 18.5%, which has helped the stock climb 88% on the year.
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The major indices are retesting the breakout from October as selling pressure has intensified in recent days. The Nasdaq, S&P 500 and Dow Jones Industrial Average have all touched down between 5-8% from their November peaks.
The VIX Index, commonly referred to as the ‘Fear Gauge’, has spiked more than 100% over the last month. The VIX generates a 30-day forward projection of volatility. It is derived from the prices of SPX index options and represents expectations for short-term price changes in the S&P 500.
In other words, the market is expecting price ranges to widen in the near-term, which is a common theme when stocks are falling. While not always the case, normally volatility is low or trending lower as stocks rise and typically trends higher as stocks fall. The old market adage speaks to this - stocks take the stairs up and the elevator down.
Over the past year, spikes in the VIX have represented solid opportunities to buy as volatility hasn’t remained elevated for too long. Looking at the 2021 return of the VanEck Vectors Semiconductor ETF (SMH - Free Report) , you wouldn’t realize that volatility had spiked so drastically in the past month and that many stocks were in bear market territory:
The VanEck Vectors Semiconductor ETF has doubled the Nasdaq’s performance this year with a return of 39%. SMH contains 25 of the top semiconductor holdings, including two of the three leaders we will discuss below. All three companies are part of the Zacks Semiconductor – Analog and Mixed industry group, which is ranked in the top 7% of all 254 industries. This industry group has outperformed this year with a return of over 34%. Historical studies have shown that about half of a stock’s future price appreciation is due to its industry grouping.
The relative outperformance of this industry group, particularly during a time of heightened volatility, is a clear sign that these stocks are in high demand. When emerging out of market corrections, normally the stocks that held up the best lead the leg back up.
While semis have advanced significantly this year, the ongoing supply constraint issues will continue into 2022. The three companies below likely still have room to run. Remember – leaders lead.
ON Semiconductor Corp. (ON - Free Report)
On Semiconductor is a supplier of standard semiconductors and power management integrated circuits used in various devices such as high-speed fiber optic equipment and portable electronics. Headquartered in Phoenix, AZ, ON provides data flow management for precision computing and communications systems, as well as power management for distributing and monitoring the supply of power within electronic devices.
Sporting a Zacks #1 rank (Strong Buy), ON has exceeded earnings estimates in each of the last six quarters. The company most recently reported earnings of $0.87, a 17.6% surprise over estimates. Over the last four quarters, ON has produced an average earnings surprise of 18.5%, which has helped the stock climb 88% on the year.
Infrastructure Stock Boom to Sweep America
A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.
The only question is “Will you get into the right stocks early when their growth potential is greatest?”
Zacks has released a Special Report to help you do just that, and today it’s free. Discover 5 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.
Download FREE: How To Profit From Trillions On Spending For Infrastructure >>
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