Semiconductor stocks can be volatile. But with patience, you can easily double or even triple your money if you know which companies to buy.
Ongoing concerns about global trade, slowing economic growth, and even concerns about espionage from China have weighed on the semiconductor sector over the last year.
History has shown that each pullback precedes another round of mergers and acquisitions or solid rebounds due to ever-growing demand from consumers, businesses, and governments.
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But with dozens of publicly traded semiconductor stocks available to investors - ranging from large-cap giants like Intel Corp. (NASDAQ: INTC) to micro-cap vendors like Kopin Corp. (NASDAQ: KOPN) - it is difficult to know which ones are poised to break out.
To find the top semiconductor stocks to buy, investors should use the Money Morning Stock VQScore™.
This proprietary rating system monitors the world's most profitable companies and assigns each one a score based on the likelihood that they will break out. Any score higher than a 4 means the stock is a "Strong Buy."
Today, we found three semiconductor stocks that are poised for big gains in 2019 and beyond...
Best Semiconductor Stocks to Buy, No. 3
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The first semiconductor stock to buy is an Israel-based firm called Nova Measuring Instruments Ltd. (NASDAQ: NVMI).
This company researches and develops metrology solutions used in the production of semiconductor manufacturing. Its products are quite popular among firms looking to make value-added X-ray and optical products.
The stock trades at a discount to the industry average across a few key metrics...
First, Nova's price/earnings (P/E) ratio of 14.92 is below the industry average of 17.
Its price-to-sales sits at just 3.01. That figure is well below the industry mean of 5.23.
And its price-to-book ratio of 2.72 means the stock is 63% cheaper than the average semiconductor stock that trades at 7.38 times book.
Shares currently trade at roughly $27.80 per share. But based on the firm's latest VQScore of 4.75, we think demand for NVMI stock is just starting to heat up...
Shares could easily hit $35 by the end of the year. That's 25% upside from Monday's closing price.
Best Semiconductor Stocks to Buy, No. 2
Next up is Applied Materials Inc. (NASDAQ: AMAT). This business manufactures equipment, services, and software for the semiconductor, display, and related industries.
Last week, we saw semiconductor prices move higher after Advanced Micro Devices Inc. (NYSE: AMD) announced that it would see sales jump "sharply" during the second half of the year.
Right now, markets are waiting for a trade deal between the United States and China. This will offer a huge boost to the global tech sector.
When that happens, the industry expects a big uptick in CPU and GPU shipments for PC notebooks, motherboards, and digital servers.
AMAT shares are also trading well below industry averages across a few key metrics...
Its P/E ratio of 10.71 is well below the industry mean of 17.
Applied Materials has an even lower price-to-sales ratio than Nova Measuring, at 2.43.
And its price-to-book ratio of 4.98 sits lower than the 7.38 seen across the industry.
But the most important metric is AMAT's 4.75 VQScore - because it's indicating the stock is about to break out in a big way...
Our research indicates shares have the potential to climb 42% to $60.
Best Semiconductor Stocks to Buy, No. 1
The top semiconductor stock to buy is Smart Global Holdings Inc. (NYSE: SGH). This firm is a global provider of specialty memory solutions.
The company owns the highest level of market share in Brazil. It manufactures mobile memory for smartphones and memory for desktops, notebooks, and servers.
The company has an impressive list of more than 250 customers, which include Cisco Systems Inc. (NASDAQ: CSCO), Samsung Electronics Co. Ltd. (OTCMKTS: SSNLF), Hewlett Packard Enterprise Co. (NYSE: HPE), Dell Technologies Inc. (NYSE: DELL), and LG Electronics Inc.
However, recent economic uncertainty around the globe has beaten down on the semiconductor sector (especially businesses with exposure to emerging markets).
But Smart Global has even more favorable metrics than the other two stocks above...
Shares trade at a dirt-cheap P/E ratio of just 4.84 - a figure that is nearly 75% lower than the industry average.
The stock is also trading at a ridiculously low price-to-sales of just 0.36 and a price-to-book value of 2.00.
And finally, the most important number we're focusing on is the company's "Strong Buy" VQScore of 4.75.
Right now, Smart Global shares are trading at just $22. And our research indicates the business is worth $40 per share.
That represents an upside of 83%.
So, you're going to want to act fast because the business may not hold this high of a VQScore when shares start to appreciate.
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