Technology stocks, and in particular semiconductor companies, have been one of the worst performing sectors during 2011.
And recent industry data doesn't inspire any confidence either: The Semiconductor Industry Association recently announced that worldwide chip sales dipped slightly to $25.2 billion in February from $25.5 billion in January.
Technology-research firm Gartner said in a note Monday that chip-equipment sales in the second quarter will likely be affected by the disasters in Japan, but they expect signs of a pickup in the second half of the year.
"Clearly, there are some materials supply challenges ahead of the industry in the aftermath of the tragic events in Japan," said Gartner analyst Klaus Rinnen. "The [semiconductor] industry still faces challenges in the coming months."
That said, there are a few reasons to be optimistic about a turnaround for the sector. Companies like Oracle, Micron, and RedHat have all reported solid results during recent days, perhaps suggesting that the market's extreme pessimism might be misplaced.
And don't forget the impact of M&A trends. Texas Instruments recently announced that it is willing to pay a whopping 78% premium to acquire National Semiconductor -- a move that might juice up tech valuations.
"Tech deals have been commanding high premiums, but this one is sure to resound for a while," wrote CNBC's David Faber. These types of headlines make "people more confident about paying a higher multiple for that [tech] stock they weren't sure was cheap."
If you believe the tech sector is set to rebound, the following list might offer an interesting starting point. All of these companies have traded down since the start of the year, but they have all seen significant institutional buying over the last three months (data sourced from Reuters).
Judging by "smart money" flows, these are the beaten up tech stocks that are expected to rebound. Do you agree? (Click here to access free, interactive tools to analyze these ideas.)
1. SemiLEDs (Nasdaq: LEDS ) : The company is a manufacturer of high brightness LED chips with state of the art fabrication facilities in Hsinchu Science Park, Taiwan. Market cap of $394.04M. The stock has lost 50.22% in 2011. Institutional investors currently own 5,442,817 shares vs. 9,720 shares held three months ago.
2. Spansion (Nasdaq: CODE ) : Spansion leads innovation in semiconductor non-volatile memory technology, designing, developing, manufacturing, marketing, selling and licensing Flash memory technology and solutions. Market cap of $1.13B. The stock has lost 12.61% in 2011. Institutional investors currently own 44,277,637 shares vs. 23,337,310 shares held three months ago (+89.73% change).
3. hiSoft Technology International (Nasdaq: HSFT ) : The company is a China-based provider of outsourced information technology and research and development services, primarily for companies in the United States and Japan. Market cap of $523.59M. The stock has lost 39.97% in 2011. Institutional investors currently own 20,006,876 shares vs. 12,140,681 shares held three months ago (+64.79% change).
4. Internet Gold Golden Lines (Nasdaq: IGLD ) : Over the last two decades, Internet Gold has grown steadily to become Israel's leading telecommunications group. Market cap of $577.15M. The stock has lost 11.09% in 2011. Institutional investors currently own 338,613 shares vs. 269,262 shares held three months ago (+25.76% change).
5. Smith Micro Software (Nasdaq: SMSI ) : The company designs, develops and markets software products and services for the mobile computing and communications industries. Market cap of $322.07M. The stock has lost 41.49% in 2011. Institutional investors currently own 24,722,855 shares vs. 21,970,008 shares held three months ago (+12.53% change).
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research. Note: The numbers on top of items represent the forward P/E ratio, if available.
Kapitall's Eben Esterhuizen does not own shares of any companies mentioned.
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