Tore Svanberg is Picking Semiconductor Stocks: Will His Picks Produce 100% Returns in 2021?

December 30, 2020

Tore Svanberg is Managing Director and Senior Research Analyst at Stifel, Nicolaus & Co., Inc. Mr. Svanberg has been with Stifel, Nicolaus & Co. since 2010, covering the technology sector, including semiconductors with a specializing in analog, mixed-signal semiconductors.

His past awards include The Wall Street Journal’s “Best on the Street” survey award.

Mr. Svanberg has been an analyst for more than 15 years, having also been an analyst with Thomas Weisel Partners, Piper Jaffray & Co. and Robertson Stephens. Mr. Svanberg is a graduate of Franklin College, Switzerland and earned an M.A. in international policy studies from the Monterey Institute of International Studies.

In this 3,894 word interview from July, 2020, exclusively in the Wall Street Transcript, Mr. Svanberg details his stocks picks and the basis behind them.

“I cover three subsegments of the semiconductor industry: analog, connectivity and processors. So if you look at those three, I do believe some are going to be holding up better than others.

Take analog, for instance, it has the closest ties to the macro economy, and because of that, we expect this segment to be the most negatively impacted by COVID-19.

Connectivity would be the one sector that we believe would be actually benefiting the most from COVID-19. So connectivity would include things like 5G spending but, more importantly, spending on broadband, which is obviously becoming really important in this COVID-19 era.

Processors, I would say, fall somewhere in between. There are certain parts of the processor industry that are benefiting from aspects like data center spending and servers, but then, there are also certain parts of the processor space that are tied to the automotive or industrial market in such a way that things are not going as well.”

This outlook led to some specific recommendations for the last six months of 2020:

“…For companies in my space, my top pick is a company called Inphi (NYSE:IPHI). They are providing semiconductor solutions for the optical part of this broadband superhighway. I also like a company called Silicon Labs (NASDAQ:SLAB), which is primarily a private player in connectivity for the IoT part of the broadband. Then, I also like a company called Power Integrations (NASDAQ:POWI).

That is not as related as much to communications, but it is a company that is benefiting from new technologies and new trends, especially in areas like fast charging…Let me start with Inphi, which is our top pick.

What I admire the most about this company is that it has done a tremendous job investing in its business over the last six to seven years. Ever since the CEO, Ford Tamer, took over, he has just been relentlessly investing in different parts of the optical networking space.

They sort of started in the long-haul market and then pivoted into data centers, and now, they are starting to become a big force in what we call DCI, or data center interconnect. So here is a company that has outspent competition significantly by investing the R&D dollars in the right areas and, perhaps more importantly, timing that investment perfectly.”

The business requirements of today’s telecommunications market drives the stock picks for Tore Svanberg:

“There is a bit of a misperception of what IoT connectivity really means.

Today, a lot of us think about things like 4G and eventually 5G. Obviously, we’re very familiar with standards like Wi-Fi and Bluetooth, but the reality is that IoT is an exceptionally fragmented industry, so there is not going to be a one-fit-for-all connectivity technology.

What Silicon Labs has done is basically develop connectivity technologies for all the various different types of IoT needs or use cases. So they are not only a dominant player in, let’s say, an area like Bluetooth or also now getting a lot of traction in Wi-Fi, but they’re also a leader in connectivity technologies like Zigbee, Thread and Z-Wave.

Believe it or not, these are actually the more dominant connectivity standards, especially in areas like the connected home, smart home, smart cities, and so on and so forth…this is a company that put a stake in the ground almost 10 years ago by basically saying they want to be the semiconductor provider of the internet of things.

This was a time when a lot of companies basically were very skeptical about what IoT really meant. But for them, this was basically a completely new market that was going to take over a lot of semiconductor growth over the following decades.

They have done a tremendous job, both from an M&A perspective but also with their investments of building that business.”

Get the complete picture by reading the entire 3,894 word interview with Tore Svanberg from July, 2020, exclusively in the Wall Street Transcript.