Could 2027 Be the Year Semiconductors Finally Cool Off?

Long_Equity
07-09

The outperformance of semiconductor $VanEck Semiconductor ETF(SMH)$ companies isn’t a new thing.

However, 2-3 years of outperformance are normally met with a mild correction afterwards.

2026 could be the fourth year in a row of outperformance, suggesting 2027 could see a correction - not that markets listen to historic trends!

PS: Here’s my framework for determining whether a company is investable:

1. Financials - I look for consistently high returns on capital, high FCFps growth, margin expansion, and affordable debt.

2. Qualitative - Here I look for high market share, a mission critical product, a business not overly reliant on raw materials and expensive to maintain physical assets.

3. Valuation - I infer how much growth the market is pricing in, I then analyse whether that’s realistic or not.

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap
Leave a comment