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Big Short Interest Swings 3 Top Semiconductor Stocks

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Big Short Interest Swings 3 Top Semiconductor Stocks

  • Short interest in the leading semiconductor stocks was mixed again in late November.
  • Short sellers piled on Analog Devices, Inc. (NASDAQ: ADI) and Qorvo Inc (NASDAQ: QRVO) in particular during that time.
  • Yet, the number of Broadcom Corporation (NASDAQ: BRCM) shares short dropped sharply by month's end.
  • There were some big short interest moves in the leading semiconductor-related stocks between the November 13 and November 30 settlement dates, both to the upside and the down.

    Short sellers especially moved on Analog Devices and Qorvo. The numbers of their shares short swelled more than 40 percent in the final two weeks of the month.

    However, the number of Broadcom shares short dropped sharply in the period, ahead of its acquisition by Avago Technologies.

    Below is a closer look at how these three stocks have fared recently and what analysts expect from them. That is followed by a glance at the short interest moves in other key chip stocks.

    Related Link: 5 Tech Trends To Watch In 2016

    Analog Devices

    Short interest in this integrated circuits maker jumped more than 53 percent during the period to more than 7.95 million shares. That was the second highest number of shares sold short so far this year, and it represents more than 2 percent of the float. The days to cover dropped to less than three.

    Analog Devices has a market capitalization of more than $17 billion, with a dividend yield near 2.8 percent. Its operating margin is better than the industry average, but Apple inventory issues led to a recent downgrade of the shares.

    The consensus recommendation of 29 analysts surveyed by Thomson/First Call is to buy Analog Devices shares. Their mean price target suggests they see more than 14 percent upside in the stock over the next year; however, shares traded above that target last June.

    The share price rose more than 3 percent during the final two weeks of November, compared to a gain of less than 3 percent for the Nasdaq. Over the past six months, the stock has underperformed larger competitor Texas Instruments, as well as the broader markets.

    Broadcom

    The number of shares sold short retreated more than 35 percent to about 4.92 million by month's end, which was about 1 percent of the float and less than half of the short interest at the peak in September. At the current daily average volume, it would take more than a day to cover all short positions.

    Broadcom is to be acquired by Avago Technologies, a deal that pleased analysts. The company has a market capitalization of almost $35 billion and a dividend yield near 0.9 percent. Its operating margin is greater than the industry average.

    Only seven of the 30 analysts polled recommend buying shares, but none recommend selling them or rate Broadcom at Underperform. The share price has overrun their mean price target, meaning the analysts see no further upside at this time.

    Short sellers watched the stock climb less than 6 percent during the short interest period, as well as an additional 5 percent or so since then. Over the past six months, the shares have outperformed the Nasdaq, but its performance is in line with competitor Texas Instruments.

    Qorvo

    The 7.25 million shares short as of the end of the month was up about 42 percent from the previous settlement date. It also was more than 5 percent of the float of this radio frequency systems maker. As the average daily volume dropped, days to cover rose to more than three.

    A third-quarter earnings beat gave shares a boost in November. Qorvo has a market cap of almost $8 billion. Its long-term earnings growth forecast is about 15 percent, but the return on equity is only around 2 percent.

    All but four of the 21 surveyed analysts recommend buying Qorvo shares, with six of them rating the stock at Strong Buy. A move to their mean price target would be a gain of almost 20 percent for current shareholders.

    The share price ended the two-week period more than 14 percent higher. The stock has underperformed the broader markets and peers Skyworks Solutions and Avago Technologies over the past six months.

    Related Link: Chewing On Chips: Looking For Semiconductor ETFs To Rebound In 2016

    And Others

    The number of shares short in Applied Materials, Avago Technologies and Xilinx also swelled by double-digit percentages in the final weeks of November. Short interest in Lam Research, Marvell Technology, NXP Semiconductors, Skyworks Solutions and Texas Instruments grew more modestly.

    Short sellers retreated somewhat from Altera, ARM Holdings, Intel, KLA-Tencor, Maxim Integrated Products, Microchip Technology, Micron Technology, NVIDIA and Qualcomm in the period, but especially from Linear Technology. The number of its shares short shrank by more than 19 percent.

    At the time of this writing, the author had no position in the mentioned equities.

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