The 5 Worst Semiconductor Stocks in January

As January comes to a close, there are few investors more excited than anyone who owns shares of semiconductor stocks. The Philadelphia Semiconductor index -- a useful proxy for the industry -- is up a whopping 13.4% so far this month! The semiconductor industry has already recovered all of its losses from a brutal 2011. That's truly incredible.

However, while the industry is having a banner month, not every company is seeing its shares take off. Following are the five semiconductor stocks with the worst returns so far in January.

Company Name

% Price Change

Spreadtrum Communications (Nasdaq: SPRD  ) (22.7)
CEVA (Nasdaq: CEVA  ) (7.5)
RF Micro Devices (Nasdaq: RFMD  ) (5.74)
Microchip Technology 0.423
ARM Holdings (Nasdaq: ARMH  ) 0.676

Source: S&P Capital IQ. Includes only companies with a market cap greater than $500 million and listed on U.S. exchanges. Excludes NetLogic, which is being acquired by Broadcom.

The fact that two of the five worst performers still had positive returns so far this month illustrates just how well semiconductor stocks fared recently. Overall, the most important takeaway from the list is the dangers of chasing returns. Three out of the five companies above made the list of top-performing semiconductor stocks in 2011.

Guess that outperformance didn't last.

Spreadtrum can thank fellow bottom performer RF Micro Devices for its drop. When RF Micro reported weak earnings at the beginning of the month, it pointed a finger at softening demand in China -- exactly the market Spreadtrum operates in.

CEVA and ARM hold quite a bit in common in that both focus on licensing, both were top performers in the industry last year, and both make the list of underperformers despite little news during the month. In ARM's case, you could argue that its underperformance is due to investors who heard the footsteps of an 800-pound giant getting louder behind it.

At this year's Consumer Electronics Show, Intel (Nasdaq: INTC  ) showed off its new Medfield chips targeted at smartphones. While the chips still aren't quite as power-efficient as ARM chips, they pack a nice performance punch. Intel's the closest it's been in the past decade to becoming relevant in mobile, which should be a scary thought to ARM investors.

Speaking of beaten-down stocks, The Motley Fool has a just released free report on mobile named "The Next Trillion-Dollar Revolution" that details a "hidden" component play inside mobile phones that also is a market leader in the exploding Chinese PC market. The company recently declined on some short-term concerns, but we believe it has vast potential that's unappreciated by Wall Street and that will have the company strongly outperforming in the coming years. Hundreds of thousands have requested access to previous reports, but you can be among the first to access this just-released report -- and it's free.

Eric Bleeker owns shares of no companies listed above. The Motley Fool owns, and Motley Fool newsletter services have recommended buying, shares of Intel. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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