4 Chip Stocks to Buy That Don’t Need PC Growth for a Strong Finish to 2014

By Lee Jackson Published Sep 2, 11:45AM EDT

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With the Labor Day holiday over, and investors looking for ideas in a sky-high market, one area that looks to continue its success is technology. While investors breathlessly await the huge upcoming Apple presentation this month, now may be just the right time to consider adding some new stocks to portfolios for the final third of the year.

In a new report, the chip analysts at Jefferies recap data acquired when the company recently hosted corporate management from 35 semiconductor and communications hardware companies at the firm’s annual Chicago Investor Summit. They came away very positive on four top stocks to buy and raised price targets on three of them.

Analog Devices Inc. (NASDAQ: ADI) is a top stock to buy at Jefferies, and it is still well below the highs for the year printed in early June. The Jefferies team is very positive on the prospects for growth in communications driven by wireless base stations and TD deployments in China. They also see recovery in the industrial sector and growth in the automobile markets over the next year. Investors are treated to a very competitive 3% dividend. Jefferies slightly lowers its price target on the stock to $58. The Thomson/First Call consensus target is $57.08. The stock closed last Friday at $51.12 a share.

Cavium Inc. (NASDAQ: CAVM) generates close to 18% of its revenue from its association with Cisco Systems, with security and multi-core embedded processors. The Jefferies team sees the company well positioned with multi-core processor portfolio and design wins in enterprise and service provider markets. Jefferies raises the price target to $64, while the consensus figure is set well below that at $52.74. Shares closed on Friday at $56.18.

Micron Technology Inc. (NASDAQ: MU) has absolutely been on fire for the past year. It is a leader in DRAM chip sales and one of the top Wall Street memory picks. With the bar set very high, the stock again delivered numbers that Wall Street applauded for the second quarter. The Jefferies analysts believe Micron’s breadth of offerings, combined with its system level expertise in computers, servers and mobile, represents a significant strategic advantage over less diversified competitors such as SanDisk. Jefferies bumps the price target on the stock to $40, and the consensus target is lower at $38.32. Micron closed trading Friday at $32.60.

M/A-Com Technology Solutions Holdings Inc. (NASDAQ: MTSI) is a stock that many investors may not be as familiar with, but it could have very solid upside. The Jefferies analysts applaud the company’s focus on research and development and increased design wins in higher margin business segments. They also cite benefits from product cycles in wireless infrastructure, power transistors and even the slowing wireline business for long-haul and data centers. Jefferies raises its price target to $27, and the consensus target is $24.29. The stock closed Friday up almost 4% to $23.68.

These Jefferies stocks to buy represent substantially more upside potential than many current technology stocks. While many on Wall Street are giddy at new stock market highs, our readers may want to scale some capital in now and see if a fall sell-off doesn’t offer even better entry points.

About the Author Lee Jackson →

Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad and diverse career, which included a stint as the creative services director at the NBC affiliate in Austin, Texas, gives him unique insight into the financial industry and world.

Lee Jackson's journey in the financial industry spans over 30 years, with nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career was marked by his presence on the sell side during pivotal Wall Street events, from the dot.com rise and bubble to the Long Term Capital Management debacle, 9/11, and the Great Recession of 2008. This is a testament to his resilience and adaptability in the face of market volatility.

Lee Jackson’s practical financial industry experience, acquired from a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing on various platforms. This unique combination allows him to shed light on the intricacies and workings of Wall Street in a way that only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.

Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.