As the market finally gets over the fact that personal computer (PC) growth has slowed and they begin to factor in the long-term ramifications, there is also a very bright side to the equation. NAND flash growth should continue to be outstanding, and other areas also are picking up steam. For the top semiconductor capital equipment companies, this could be just the recipe to ignite growth in the second half of 2016.

In a new research report, Stifel analysts make the case that NAND flash memory, which is a type of non-volatile storage technology that does not require power to retain data, could see significant growth, as high as 20%. They also think foundry spending could deliver to the upside. We screened the report looking for some of the firm’s top stocks rated Buy, and found four that look very solid. Two are large caps, and two are smaller cap plays.

Applied Materials

This semiconductor capital equipment leader has lagged the overall tech market over the past year, but its shares have bounced smartly off lows printed in February and back in December. Applied Materials Inc. (NASDAQ: AMAT) is actually now finally trading above all the moving averages, and for patient investors may be a high-quality pick now.

The company is the global leader in precision materials engineering solutions for the semiconductor, flat panel display and solar photovoltaic industries. Applied Material’s technologies help make innovations like smartphones, flat screen TVs and solar panels more affordable and accessible to consumers and businesses around the world.

The company posted solid results last week that beat expectations and it raised guidance going forward. Merrill Lynch noted that the company’s core business improved from improving semiconductor capital equipment spending. The firm also cited an increase in organic light-emitting diode (OLED) adoption by companies like Apple as a positive.

Many on Wall Street think that films companies like Applied Materials will benefit from the new Intel and Micron Technology 3D XPoint (which is pronounced 3D cross-point) technology, which is an entirely new class of nonvolatile memory that can help turn immense amounts of data into valuable information in real time.

Applied Materials investors are paid a 1.77% dividend. The Stifel price target for the stock is $24. The Thomson/First Call consensus price target is listed at $25.28. The stock closed Monday at $22.90 per share.
Lam Research

This company remains one of the top chip equipment picks across Wall Street. Lam Research Corp. (NASDAQ: LRCX) designs, manufactures, markets, refurbishes and services semiconductor processing equipment used in the fabrication of integrated circuits. The company offers plasma etch products that remove materials from the wafer to create the features and patterns of a device.

Many Wall Street analysts have highlighted the company and its peers as having a significant equipment opportunity from the NAND evolution as well. Lam Research also appears well positioned to gain share in the wafer fab equipment (WFE) market, driven by a strong focus on technology inflection spending over the next few years.

Despite so-so foundry and logic spending in 2015, many on Wall Street think that Lam Research also will continue to benefit from technology transitions such as FinFET, 3D NAND, multi patterning and advanced packaging in 2015 and beyond. Many analysts believe it is the “cleanest” semi cap story benefiting from cyclical tailwind, SAM expansion and share gains.

Lam Research investors are paid a 1.56% dividend. Stifel has a $93 price target for the stock. The consensus estimate is at $94.79. Shares closed on Monday at $76.82.

MKS Instruments

This is a company that flies somewhat under the radar, but it offers solid upside. MKS Instruments Inc. (NASDAQ: MKSI) provides instruments, subsystems and process control solutions that measure, control, power, monitor and analyze critical parameters of manufacturing processes in the United States and internationally. The company operates through four segments: Advanced Manufacturing Capital Equipment, Global Service, Asia Region Sales and Other.

MKS offers pressure measurement and control products used for various pressure ranges and accuracies; materials delivery products, including gas flow measurement products and vacuum valves; automation and control products, such as automation platforms, programmable automation controllers, temperature controllers and software solutions for use in automation, I/O and distributed programmable I/O, gateways and connectivity products; and vacuum products comprising vacuum containment components, effluent management subsystems and custom stainless steel chambers, vessels and pharmaceutical process equipment hardware and housings.

MKS shareholders receive a 1.81% dividend. The $49 Stifel price target compares to a consensus price objective set at $42.80 and the most recent closing price of $37.85.

Nanometrics

This is a micro-cap company that could also hold big upside for aggressive accounts. Nanometrics Inc. NASDAQ: NANO) is a leading provider of advanced, high-performance process control metrology and inspection systems used primarily in the fabrication of semiconductors and other solid-state devices, including sensors, optoelectronic devices, high-brightness LEDs, discretes and data storage components.

The company’s automated and integrated metrology systems measure critical dimensions, device structures, topography and various thin film properties, including three-dimensional features and film thickness, as well as optical, electrical and material properties. Its process control solutions are deployed throughout the fabrication process, from front-end-of-line substrate manufacturing, to high-volume production of semiconductors and other devices, to advanced three-dimensional wafer-level packaging applications.

The Stifel price objective of $21 is in line with the consensus target price of $21.50. The shares closed most recently at $17.98 apiece.

While these stocks are only suitable for very aggressive risk tolerant accounts, the anticipated increase in spending in the second half of 2016 could make a solid difference to the top and bottom lines of these well-run companies.

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