Like the rest of the market, the technology sector, and specifically the semiconductor arena, has had a very tough go of it this year. In fact, through the end of last week the PHLX Semiconductor Sector (SOX) index, which tracks the chips, was down over 9%, although Monday’s rally certainly helped.

While earnings for the group were hit and miss, investors have stayed focused on very so-so fundamentals. While the big picture may not be exciting, certain areas of the sector are looking very strong.

In a new research report from Deutsche Bank, while remaining neutral on the sector as a whole, the firm has four companies it does like, as the analysts believe the stories behind the companies and valuation make them compelling ideas for investors now. All four are rated Buy, and they are really suited for more aggressive accounts.

Broadcom

This is the combined entity after the merger of Avago Technologies and the old Broadcom. The new Broadcom Ltd. (NASDAQ: AVGO) is a leading designer, developer and global supplier of a broad range of analog and digital semiconductor connectivity solutions. Broadcom’s extensive product portfolio serves four primary end markets: wired infrastructure, wireless communications, enterprise storage and industrial and other.

Applications for the company’s products in those end markets include: data center networking, home connectivity, broadband access, telecommunications equipment, smartphones and base stations, data center servers and storage, factory automation, power generation and alternative energy systems and displays.

The company produces radio frequency (RF) front-end for LTE-enabled Apple products. Wall Street estimates that the company does 15% of its total business with Apple. Additional estimates are that it has between a 13% and 17% revenue exposure to Apple in the wireless communications segment, which was guided up 10% or so quarter over quarter for the third quarter. Customer diversity and content for Samsung could be more than enough to offset slower Apple business.

Top Wall Street analysts like the leadership in the mobile, data center and broadband markets, and especially in the RF arena. Many on Wall Street see a cyclical rebound in industrial and communications demand.

Broadcom investors are paid a 1.45% dividend. The Deutsche Bank price target for the stock is $157, and the Thomson/First Call consensus target is set at $170.04. Shares closed most recently at $130.64.

NXP Semiconductors

This is considered a top play for investors looking for a chip stock with Internet of Things exposure, and it is down a stunning 38% from highs printed in June of 2015. The NXP Semiconductors N.V. (NASDAQ: NXPI) merger with Freescale Semiconductor was widely applauded on Wall Street, and many analysts believe the merger is transforming the company into a powerhouse. It made NXP the fourth largest semiconductor company in the industry. It is also important to note that the combined company would be the number one supplier in auto semiconductors, number one supplier in global microcontrollers and a dominant supplier in mobile payments.

NXP is getting its chips into high-growth areas such as contactless mobile payments, the Internet of Things, mobile-phone charging, increased cellular data consumption and LED lighting. With shares trading at a massive 40% discount to peers, analysts are very positive on the faster earnings growth potential relative to the competition.

Deutsche Bank has set its price target at $110, above the consensus target price of $104.54. The stock closed Monday at $69.91 per share, up over 5% on the day.
Maxim Integrated Products

This company supplies some chips to Samsung for the Galaxy S6. Maxim Integrated Products Inc. (NASDAQ: MXIM) designs, develops, manufactures and markets various linear and mixed-signal integrated circuits worldwide. The company also provides a range of high-frequency process technologies and capabilities for use in custom designs. It primarily serves automotive, communications and data center, computing, consumer and industrial markets.

The company posted very positive second-quarter fiscal 2016 earnings, and it continues to be one of Wall Street’s favorite companies in the chip space. Last year Maxim was rumored to be in the sites of Avago, which went on to buy Broadcom. Rumors are swirling again that Maxim is a potential takeover target, this time with the Chinese company Tsinghua Unigroup mentioned as a potential buyer.

Maxim shareholders are paid a 3.59% dividend. The $40 Deutsche Bank price target for the stock is higher than the consensus target of $37.27. The shares closed most recently at $33.45.

MaxLinear

This is a smaller cap player that could provide big upside for investors. MaxLinear Inc. (NYSE: MXL) is a global provider of integrated, radio frequency and mixed-signal integrated circuits and systems-on-a-chips (SoCs). The company is a pioneer in multimedia over coax alliance (MoCA) technology and its products serve broadband communications and infrastructure industries, including cable TV, satellite TV, data center, metro and long-haul optical transport network applications.

Trading at a very reasonable 9.8 times estimated 2016 earnings, the stock is at a discount to peers. This is another company that could be a very viable takeover candidate. In addition, the company recently announced a partnership with Celeno Communications, a leading provider of high-performance Wi-Fi silicon and software solutions, to jointly developed reference design that combines the best in MoCA and Wi-Fi home network technologies to enable whole home gigabit Wi-Fi.

The Deutsche Bank price target for MaxLinear is posted at $20, and the consensus estimate is $20.50. The stock closed on Monday at $15.75, up 5% on the day.

All these companies avoid a dependence on the PC market and have very specialized and in-demand product silos. They make good sense for investors looking to add quality chip companies to aggressive growth portfolios.

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