InvestMacro

By Trevor Thornton, Arizona State University 

Semiconductors are a critical part of almost every modern electronic device, and the vast majority of semiconductors are made in Tawain. Increasing concerns over the reliance on Taiwain for semiconductors – especially given the tenuous relationship between Taiwan and China – led the U.S. Congress to pass the CHIPS and Science act in late July 2022. The act provides more than US$50 billion in subsidies to boost U.S. semiconductor production and has been widely covered in the news. Trevor Thornton, an electrical engineer who studies semiconductors, explains what these devices are and how they are made.

1. What is a semiconductor?

Generally speaking, the term semiconductor refers to a material – like silicon – that can conduct electricity much better than an insulator such as glass, but not as well as metals like copper or aluminum. But when people are talking about semiconductors today, they are usually referring to semiconductor chips.

These chips are typically made from thin slices of silicon with complex components laid out on them in specific patterns. These patterns control the flow of current using electrical switches – called transistors – in much the same way you control the electrical current in your home by flipping a switch to turn on a light.

The difference between your house and a semiconductor chip is that semiconductor switches are entirely electrical – no mechanical components to flip – and the chips contain tens of billions of switches in an area not much larger than the size of a fingernail.

2. What do semiconductors do?

Semiconductors are how electronic devices process, store and receive information. For instance, memory chips store data and software as binary code, digital chips manipulate the data based on the software instructions, and wireless chips receive data from high-frequency radio transmitters and convert them into electrical signals. These different chips work together under the control of software. Different software applications perform very different tasks, but they all work by switching the transistors that control the current.

3. How do you build a semiconductor chip?

The starting point for the vast majority of semiconductors is a thin slice of silicon called a wafer. Today’s wafers are the size of dinner plates and are cut from single silicon crystals. Manufacturers add elements like phosphorus and boron in a thin layer at the surface of the silicon to increase the chip’s conductivity. It is in this surface layer where the transistor switches are made.

The transistors are built by adding thin layers of conductive metals, insulators and more silicon to the entire wafer, sketching out patterns on these layers using a complicated process called lithography and then selectively removing these layers using computer-controlled plasmas of highly reactive gases to leave specific patterns and structures. Because the transistors are so small, it is much easier to add materials in layers and then carefully remove unwanted material than it is to place microscopically thin lines of metal or insulators directly onto the chip. By depositing, patterning and etching layers of different materials dozens of times, semiconductor manufacturers can create chips with tens of billions of transistors per square inch.

4. How are chips today different from the early chips?

There are many differences, but the most important is probably the increase in the number of transistors per chip.

Among the earliest commercial applications for semiconductor chips were pocket calculators, which became widely available in the 1970s. These early chips contained a few thousand transistors. In 1989 Intel introduced the the first semiconductors to exceed a million transistors on a single chip. Today, the largest chips contain more than 50 billion transistors. This trend is described by what is known as Moore’s law, which says that the number of transistors on a chip will double approximately every 18 months.

Moore’s law has held up for five decades. But in recent years, the semiconductor industry has had to overcome major challenges – mainly, how to continue shrinking the size of transistors – to continue this pace of advancement.

One solution was to switch from flat, two-dimensional layers to three-dimensional layering with fin-shaped ridges of silicon projecting up above the surface. These 3D chips significantly increased the number of transistors on a chip and are now in widespread use, but they’re also much more difficult to manfacture.

5. Do more complicated chips require more sophisticated factories?

Simply put, yes, the more complicated the chip, the more complicated – and more costly – the factory.

There was a time when almost every U.S. semiconductor company built and maintained its own factories. But today, a new foundry can cost more than $10 billion to build. Only the largest companies can afford that kind of investment. Instead, the majority of semiconductor companies send their designs to independent foundries for manufacturing. Taiwan Semiconductor Manufacturing Co. and GlobalFoundries, headquartered in New York, are two examples of multinational foundries that build chips for other companies. They have the expertise and economies of scale to invest in the hugely expensive technology required to produce next-generation semiconductors.

Ironically, while the transistor and semiconductor chip were invented in the U.S., no state-of-the-art semiconductor foundries are currently on American soil. The U.S. has been here before in the 1980s when there were concerns that Japan would dominate the global memory business. But with the newly passed CHIPS act, Congress has provided the incentives and opportunities for next-generation semiconductors to be manufactured in the U.S.

Perhaps the chips in your next iPhone will be “designed by Apple in California, built in the USA.”

About the Author:

Trevor Thornton, Professor of Electrical Engineering, Arizona State University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

By Ino.com

So far this year, the stock market has flashed more red signs than green due to various macroeconomic and geopolitical concerns. The immense volatility weighed heavily on equities and government bond yields.

The CBOE Volatility Index (VIX) gained 29.5% year-to-date.

However, the major stock indexes rose in the last trading session to end their best month since 2020, slashing some losses from a gloomy first half of the year. The S&P 500 gained 9.1% in July, while the Dow Jones Industrial Average rose 6.7%, reflecting their strongest month since November 2020. The Nasdaq Composite rose 12.4%, marking its best month since April 2020.

Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, said, “We are seeing a relief rally in the stock market, as pessimism reached extreme levels, and as longer-term interest rates have been coming back down.”

Optimistic expectations from the upcoming earnings releases have also encouraged investors to take a breather from the idea of a slowing economy and further interest rate hikes.

Occidental Petroleum Corporation (OXY), Molina Healthcare, Inc. (MOH), and Greif, Inc. (GEF) are hovering near their 52-week highs and could be the ideal additions to your watchlist now given their strong fundamentals and momentum.

Occidental Petroleum Corporation (OXY)

OXY is engaged in acquiring, exploring, and developing oil and gas properties in the United States, Middle East, Africa, and Latin America.

The company operates through three segments: Oil and Gas, Chemical, Midstream, and Marketing. It develops, processes, transports, and markets oil and condensate, natural gas liquids (NGLs), and natural gas. It also manufactures basic chemicals.

On June 27, 2022, OXY’s subsidiary, 1PointFive, and Manulife Investment Management entered into a lease agreement for approximately 27,000 acres of timberland in Western Louisiana.

This agreement provides 1PointFive with access to subsurface pore space and surface rights to develop and operate a carbon sequestration hub, with access to permanently store industrial carbon emissions. This is expected to promote the company’s sustainability goals.

OXY’s net sales increased 57.7% year-over-year to $8.35 billion in the fiscal 2022 first quarter ended March 31, 2022. Its income from continuing operations rose 1,530.8% from the prior-year period to $4.88 billion.

The company’s adjusted income attributable to common stockholders and adjusted EPS came in at $2.13 billion and $2.12, up 1,664% and 1,513.3%, respectively, year-over-year.

The consensus EPS estimate of $3.03 for the second quarter (ended June 30, 2022) represents an 846.6% improvement year-over-year. The consensus revenue estimate of $9.81 billion for the to-be-reported quarter indicates a 63.2% increase from the same period last year.

The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in three of the trailing four quarters.

Over the past year, the stock has gained 145.5% to close the last trading session at $65.75. It is currently trading 11.2% below its 52-week high of $74.04, which it hit on May 31, 2022.

OXY’s POWR Ratings reflect solid prospects. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It has an A grade for Momentum and a B for Growth and Quality. It is ranked #38 out of 97 stocks in the B-rated Energy – Oil & Gas industry. Click here to learn more about POWR Ratings.

Molina Healthcare, Inc. (MOH)

MOH provides managed health care services to low-income families and individuals under Medicaid and Medicare programs and through state insurance marketplaces. The company operates through four segments: Medicaid, Medicare, Marketplace, and Other.

It offers healthcare services through contracts with providers, independent physicians and physician groups, hospitals, and ancillary providers.

On July 13, 2022, MOH announced that it had agreed to acquire the assets of My Choice Wisconsin. MOH’s President and CEO Joe Zubretsky said, “The addition of My Choice Wisconsin to Molina’s expanding footprint is not only complementary to our existing Medicaid business in Wisconsin, but also representative of our strategic growth initiatives.”

During the fiscal second quarter (ended June 30, 2022), MOH’s total revenue increased 18.4% year-over-year to $8.05 billion. Its operating income rose 32.2% from the year-ago value to $361 million.

The company’s adjusted net income grew 33.7% from the same period last year to $266 million, while its adjusted EPS came in at $4.55, representing a 33.8% increase year-over-year.

Analysts expect MOH’s EPS and revenue for the fiscal third quarter (ending September 2022) to increase 50.5% and 11.4% year-over-year to $4.26 and $7.84 billion. The company has surpassed the consensus EPS estimates in three of the trailing four quarters.

Over the past year, the stock has gained 28.4% to close the last trading session at $327.72. It is currently trading 6.4% below its 52-week high of $350.19, which it hit on April 21, 2022.

MOH’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in the POWR Ratings system. MOH also has an A grade for Quality and a B grade for Value.

The stock is ranked #4 of 11 in the A-rated Medical – Health Insurance industry. Click here to learn more about POWR Ratings.

Greif, Inc. (GEF)

GEF is a global producer of industrial packaging products and services with operations in over 35 countries. The company operates through three segments: Global Industrial Packaging, Paper Packaging & Services, and Land Management.

It produces steel, plastic, fiber drums, intermediate bulk containers, containerboard, uncoated and coated recycled paperboard, tubes and cores, and a diverse mix of specialty products.

On June 23, 2022, the company’s Board of Directors announced a $150 million share repurchase program. GEF has entered into a $75 million accelerated share repurchase agreement with Bank of America, N.A. to repurchase its Class A stock shares and plans to repurchase an aggregate of $75 million shares of its Class A and Class B stock in open market purchases. This reflects the company’s strong cash flows and ability to boost shareholder returns.

For the fiscal second quarter ended April 30, 2022, GEF’s net sales increased 24.4% year-over-year to $1.67 billion. The company’s gross profit increased 27.4% year-over-year to $338.70 million. Also, its adjusted EBITDA increased 42.1% year-over-year to $251 million.

For the third quarter ended July 31, 2022, GEF’s EPS and revenue are expected to increase 3.4% and 7.1% year-over-year to $2 and $1.60 billion, respectively. It has surpassed the consensus EPS estimates in three of the trailing four quarters.

The stock has gained 16.1% over the past year to close the last trading session at $70.62. GEF is currently trading 1.9% below its 52-week high of $72, which it hit on November 10, 2021.

GEF’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, translating to a Buy in the POWR Ratings system. It also has a B grade for Value and Quality.

Within the A – rated Industrial – Packaging industry, it is ranked #3 out of 22 stocks. Click here to learn more about POWR Ratings.

About the Author

Shweta Kumari’s profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions. Shweta graduated with a bachelor’s degree in accounting and finance and is currently pursuing the Chartered Accountancy course. Shweta is a regular contributor for StockNews.com.

By Ino.com – See our Trader Blog, INO TV Free & Market Analysis Alerts

Source: 3 Stocks Trading Near 52-Week Highs

By Ino.com

Since 2017, the King of the Exchange Traded Fund world has slowly been losing ground to its closest competitors.

The SPDR S&P 500 ETF Trust (SPY), the undisputed ETF King since ETFs became popular, is set to lose its crown within the next few years. Well, perhaps it would be better to say that it will lose one of its crowns or maybe one of its world titles while still holding a few others. Let me explain…

The SPY ETF is and has been, with the exception of just a handful of months over the last 20-plus years, the largest Exchange Traded Fund in terms of assets under management. Currently, SPY has $365 billion under management.

In contrast, the next closest competitor, iShares Core S&P 500 ETF (IVV), has $298 billion, and then there is the Vanguard S&P 500 ETF (VOO) at $264 billion in assets.

The SPDR ETF has more than $65 billion in assets compared to the second largest ETF and more than $100 billion compared to the third largest ETF. So why are there predictions that its competitors will overtake it in the coming years?

First and foremost, since 2017, it has been losing ground to IVV and VOO, and based on results from the first half of 2022, the trend doesn’t appear to be changing. VOO has added $29.2 billion in assets year-to-date, while IVV has added $15.7 billion. On the other hand, SPY has lost $22.7 billion.

Also, it is essential to remember that these three ETFs we are comparing all due literally the same thing, track the S&P 500’s performance.

It is not as if we are comparing a NASDAQ-focused ETF and a S&P 500 ETF, these three funds are all built the same. They own the 500 stocks that make up the S&P 500 based on a market capitalization weighting. That matters because this shows that the three fund’s asset changes are not based on performance but on investor preference showing that they are pulling money from one fund in mass and adding it to the others.

Why is this shift occurring?

Simple! Cost.

Despite being the undisputed King of the ETF world, the SPY has one chink in its amour; it is expensive compared to the competition. Like really expensive. The SPY charges a 0.09% expense ratio. So in dollar terms, that would mean an investor with $10,000 in SPY pays $9.00 per year.

But IVV and VOO only charge 0.03% or $3.00 for every $10,000 invested. SPY is three times as expensive as the competition, which offers a nearly identical product. It makes no sense for long-term buy-and-hold investors to stick with SPY and pay the higher fee.

As for other types of investors, say those who trade or put on hedged positions or different complicated investing strategies, it does still make sense why they would use SPY instead of the alternatives. SPY still has the best liquidity.

The current average daily volume for SPY is 93 million shares trading hands per day. IVV’s average volume is 6.2 million, and VOO’s is 5.6 million. Even these figures back the thesis that long-term buy-and-hold investors are buying IVV and VOO while traders are trading SPY.

Traders don’t care as much about the higher cost when they have access to the type of liquidity SPY offers, allowing them to quickly and seamlessly get in and out of a position. This is why SPY may lose its crown as King of the ETFs from an asset standpoint.

Still, it will not likely lose its title as the most liquid ETF because while the competition may be within striking distance from an asset under management standpoint, they aren’t even in the same ballpark when it comes to average daily volume.

So if you are an investor in SPY, you need to ask yourself why. Do you need the liquidity, or have you just been complacent and not switched to one of the ETFs more suited for your type of investing?

Matt Thalman
INO.com Contributor
Follow me on Twitter @mthalman5513

Disclosure: This contributor did not hold a position in any investment mentioned above at the time this blog post was published. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.

By Ino.com – See our Trader Blog, INO TV Free & Market Analysis Alerts

Source: SPY Set To Lose Its Crown

By Peter Bloom, University of Essex 

The tech industry has been rocked by recent economic woes. While once thought of as close to recession proof, companies from Netflix to Meta are suddenly experiencing serious financial setbacks. As the Washington Post reported last week: “Big tech is bracing for a possible recession, spooking other industries”. Meta (the company that owns Facebook) has seen its share prices drop by more than 50% this year, with its iconoclastic CEO, Mark Zuckerberg, “visibly frustrated” at recent company Q&As with employees.

There are a range of reasons for this downturn, including a troubling mix of reduced consumer spending and fears of an uncertain future. The tech-focused Nasdaq index has dropped 24% in value since January in this year alone, while lay-offs have been announced across the industry – with some reports counting more than 60,000 tech redundancies globally so far this year.

In addition to cutting staff, technology companies are passing on these problems to consumers. People are already facing higher prices for some streaming services, and more increases are expected. Netflix has raised prices for consumers in countries including the UK and the US. They are also trying to stop people from different households sharing passwords. Amazon has also been criticised for increasing its subscription fees recently for Prime delivery and streaming services.

Users have been cancelling subscriptions to cut costs. Many of these services have become heavily embedded in our lives, however, with new technologies fundamentally transforming the way people interact, communicate, work and entertain themselves in recent years.

But there are growing concerns about the way these companies operate, aside from their profit levels and cost burden at a time of belt-tightening. Many users resent the fact that they still have relatively little power over how these technologies are developed and consumed. Tech corporations largely set the prices and conditions for both users and workers.

While many consumers accept this state of affairs, others are attempting to challenge huge tech conglomerates with platforms that give consumers, creators and workers more power. This idea is extending into data use as well. Even before the economic downturn, people were raising serious concerns about the use of algorithms to shape what we listen to and watch, for example, as well as questioning business models based on profiting from user data.

Emerging tech alternatives

New tech startups such as browser provider Gener8 are seeking to target this consumer dissatisfaction. With tens of thousands of users already, this platform allows users to choose their privacy levels and get paid for the data collected from their search activity. They can also use these funds to directly support ethical projects of their choosing.

Across a range of other sectors, platform cooperatives want to revolutionise industries including transport and delivery by providing workers with fair wages and better conditions. Consumers are also given more say with the ability to jointly own, design and run these platforms according to their needs. Such initiatives are just starting to make inroads against their much more powerful for-profit corporate competitors.

This movement is also affecting the entertainment industry by attempting to challenge for-profit streaming services. Means TV was created by the media producers Naomi Burton and Nick Hayes – famous for their viral campaign ad for New York congresswoman Alexandria Ocasia-Cortez. It bills itself as the “world’s first worker-owned, anti-capitalist streaming service”, with a democratic, cooperative structure in which all decisions are made by its employees, cooperative contractors and content creators. Members pay a US$10 (£8.18) monthly fee, but there are also reduced rate options for those who cannot afford this amount.

One full-time employee told the Guardian that what makes Means TV so special is that the platform enables people to make TV and other media content with a small amount of money. Its subscription charges and donations directly fund artists so there are no pressures relating to advertising or corporate overheads.

The cooperative music streaming service Resonate applies the same concept to the music industry, in that it is owned by “artists, listeners and workers”. While less explicitly political than Means TV, Resonate still aims to provide consumers with a new level of power and control.

Under the logo “play fair, pay fair”, the platform gives users monthly credits to spend as they listen to music and after streaming the same track nine times, it is added to their library. It advertises itself as ad and bot-free, and doesn’t sell user data. Resonate’s payment system was also designed to pay artists fairly and more with each listen. By 2021, the service had almost 1,400 monthly users and could potentially handle another 2 million users, according its creators.

These are just a few examples of alternatives that, more than simply rivalling popular tech giants’ offerings, provide people with greater power over the technology they consume. And while these ethical alternatives are still relatively small, they could signal the beginning of an important new era of consumer power for the tech sector.

About the Author:

Peter Bloom, Professor of Management, University of Essex

This article is republished from The Conversation under a Creative Commons license. Read the original article.