Big Short Interest Swings in Chip Makers (AMAT, ARM, BRCM)

The largest percentage swings in short interest in semiconductor stocks between the February 15 and February 28 settlement dates happened to Applied Materials

and ARM Holdings

, which tumbled about 19 percent, as well as to Broadcom

, which jumped more than 29 percent. The number of shares sold short in Intel

and Micron Technology

also grew somewhat during that period, while short interest in Advanced Micro Devices

was essentially unchanged in the period. Marvell Technology

, Nvidia

, Qualcomm

and Texas Instruments

saw declines in the number of shares sold short between the February 15 and February 28 settlement dates.

This equipment and services provider to the semiconductor industry saw short interest decline about 19 percent in late February to 15.15 million shares. But that still was the second largest number of shares sold short so far this year. The short interest is still less than two percent of the float. Applied Materials named a new chief financial officer in late February and exceeded consensus EPS estimates in its most recent quarterly report. The company has a market capitalization of a little more than $16 billion and a dividend yield near three percent. The long-term earnings per share (EPS) growth forecast of this S&P 500 component is about nine percent. The operating margin is better than the industry average, but the return on equity is near zero. Of the 18 analysts who follow the stock and were surveyed by Thomson/First Call, just seven recommend buying shares. The mean price target, or where the analysts expect the share price to go, is more than six percent higher than the current share price. That target is a level the share price has not seen since May of 2011. The share price is more than 13 percent higher year to date, though it has faced resistance around $14 for the past month. The stock has outperformed the Nasdaq and competitor KLA-Tencor

over the past six months.

The number of shares sold short in this multinational semiconductor and software design company retreated more than 19 percent to about 5.33 million, essentially erasing the gain in the previous period. The short interest is a little more than one percent of the float, and days to cover has risen to more than three. This microprocessor designer has a market cap of more than $19 billion and a dividend yield of about 0.6 percent. It announced a collaboration with Synopsys

during the period and also offered up better-than-expected quarterly results in early February. The return on equity is about 14 percent, and the long-term EPS growth forecast is almost 22 percent. Half of the 10 analysts polled recommend buying shares, while none recommend selling. The analysts' mean price target suggests only about three percent upside potential. And note that the mean target is less than the recent multiyear high. Despite pulling back about four percent in the past week, the share price is up more than 54 percent from six months ago. In that time, the stock has outperformed Applied Materials, Nvidia and the Nasdaq.

Short interest in this Irvine, California-based company swelled more than 29 percent to 8.25 million shares in the final weeks of February. That is the largest number of shares sold short since last April, but it represents less than two percent of the float. In February, Broadcom unveiled a battery-saving GNSS chip, and it showed off its 4G LTE innovations at the Mobile World Congress. Broadcom has a market cap shy of $20 billion and a dividend yield near 1.3 percent. The long-term EPS growth forecast of this S&P 500 component is around 15 percent, but the price-to-earnings ratio (P/E) ratio is higher than the industry average. Of the 46 analysts surveyed, 15 rate the stock at Strong Buy and another 24 also recommend buying shares. They believe the shares have some room to grow, as their mean price target is more than 14 percent higher than the current share price. That would be a level the shares have not seen since April of 2011. Shares are trading in the same neighborhood they were at the beginning of the year, and the share price is down almost four percent from six months ago. Over that time, the stock has underperformed Quacomm, Texas Instruments and the Nasdaq.