Taiwan Semiconductors

TSMC was founded in Taiwan in 1984 and has been one of the leading suppliers of semiconductors ever since.

What are semiconductors? Well, they’re the main pieces of hardware that make computing possible. I won’t get into the details as they are far too complex for me to even understand, let alone write about. Suffice it to say that without semiconductors, you can’t make computers.

Given the ubiquity of computing devices, the TSMC share price has been on a steady rise since it first went public in 2006. It currently trades at ten times its initial cost.

Semiconductor shortage

The pandemic has caused a lot of problems for the world, but one which you may not have noticed was a worldwide shortage in semiconductors.

Semiconductors are difficult to manufacture and must be made under the strictest lab conditions. Even a single unwanted molecule can render a batch unfit for use. The entire process is incredibly expensive, sometimes taking years and requiring millions, even billions of dollars’ worth of specialized equipment and labour. 

Any disruption in the supply chain can set the whole process back by months and with economies on lockdown, it was nearly impossible to find the workforce needed to mine and extract the key minerals used in production. 

But demand for semiconductors has remained high throughout the pandemic and TSMC actually increased its revenue in 2020 by 50%. You can see this in the TSMC share price history. The company took a small hit at the start of the pandemic, but its share price then went on to almost double.

Even with reduced capacity, TSMC told investors that it expected to make $15.7bn in revenue in Q4 of this year. Production still remains stretched but the company is taking steps to meet demand, namely opening a new factory in Japan.

Japan factory and share price

While I was initially surprised by the decision to open a new factory in Japan, I have come to see the sense of it, and the subsequent jump in the TSMC share price.

This could be seen as a hedge against a more aggressive China. President Xi has recently talked openly about ‘reunifying’ Taiwan with the mainland. That could be behind TSMC’s decision to establish a base in another country.

However, I think the share price action has more to do with the choice by TSMC to reinvest its profits. Many companies, such as Shell or Apple, choose to use profits in expensive stock buybacks. Buybacks benefit shareholders in the short term, but prevent the company from expanding and adapting.

Reinvesting is the kind of action that benefits a company long term and opening a new factory shows TSMC’s commitment to the future.

Conclusion

Will I add TSMC shares to my portfolio? Yes, I think so.

I’ll be watching its price over the next few weeks in case there is a large sell-off, but I feel confident that TSMC is making the kind of decisions I want from a company I invest in.

The post What is happening with the TSMC share price? appeared first on The Motley Fool UK.

More reading

• £5,000 invested in Rolls-Royce shares on 17 April is now worth…
• Up 30% in April but still at a 10-year low! Is this the best stock to buy in May?
• 3 REITs to consider as buy-to-let gets tougher in 2026!
• Lost money on Diageo shares? Consider buying this £2.19 FTSE stock to try and make it up
• How much is needed in an ISA to target a £2,764 monthly passive income?

James Reynolds does not have a position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Taiwan Semiconductor Manufacturing. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The IQE (LSE:IQE) share price had some stellar performance in 2020. The company saw its stock rise by nearly 200% between March and December as the electronics industry started returning to normal operations. But since the start of this year, the company has produced some lacklustre returns. In fact, it’s down by around 30%. But it is worth noting that the IQE share price is still up 50% over the past 12 months.

What caused the enormous growth in 2020? And is the recent decline a buying opportunity for me?

The rising IQE share price

As a reminder, IQE designs and manufactures compound semiconductor materials. This is quite a cyclical industry, to be sure. But at the moment, there is a distinct shortage of these chips that is beginning to cause problems.

A large portion of global electronic device manufacturing is performed in China. And its economy has already made a substantial recovery since the start of the pandemic. However, while countries like the UK and the US are making good progress with the vaccine rollout, these economies are ultimately recovering at varying rates. Therein lies the problem.

Semiconductor chip producers are scattered all around the world in different economies. And many facilities remain either non-operational or at a reduced production capacity, thus creating the current chip shortage. Consequently, Renault has lowered its 2021 guidance on car production levels by 100,000 vehicles. And Samsung Electronics has stated it may have to delay the annual launch of its latest smartphone for the first time since 2009.

Looking at its 2020 full-year results, total revenue increased by 27% to £178m, while its EBITDA nearly doubled from £16.2m to £30.1m. Seeing this strong performance is encouraging. So I’m not surprised that the IQE share price exploded last year. But why is it falling now?

The risks and opportunities that lie ahead

The increase in sales is undoubtedly good news. But there remains a high degree of uncertainty amongst investors surrounding the profitability of the business. Operating losses did narrow last year. But underlying profit margins continue to underwhelm when compared to its competitors.

Its EBITDA margin currently sits around 17% versus the industry average of 25%. And some of its peers, like Taiwan Semiconductor Manufacturing Co, have underlying profit margins of about 40%.

Overall, it seems investors were expecting more so the IQE share price experienced a bit of a sell-off. Yet I can’t help but wonder if the stock is trading too cheaply. After all, its chips are essential for 5G telecommunication networks, which have just started being implemented.

The bottom line

While the lack of profitability does raise some concerns, I am quite impressed with the level of growth the firm has achieved in its top line. The chip shortage has undoubtedly helped boost sales. But I believe this increase will only continue to expand as the 5G rollout accelerates.

Based on the current IQE share price, the company has a market capitalisation of around £450m. That’s a price-to-sales ratio of 2.5 for what I believe could be explosive growth stock over the long term. Therefore I am considering adding it to my portfolio.

The post Is the IQE share price about to explode? appeared first on The Motley Fool UK.

More reading

• £5,000 invested in Rolls-Royce shares on 17 April is now worth…
• Up 30% in April but still at a 10-year low! Is this the best stock to buy in May?
• 3 REITs to consider as buy-to-let gets tougher in 2026!
• Lost money on Diageo shares? Consider buying this £2.19 FTSE stock to try and make it up
• How much is needed in an ISA to target a £2,764 monthly passive income?

Zaven Boyrazian does not own shares in IQE. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Chinese electric car powerhouse NIO (NYSE: NIO) saw its shares dip in value yet again yesterday. The NIO share price had seen an explosion at the start of 2021, reaching a high of $62 in early February. However, broader concerns about the global shortage of semiconductors have triggered a sell-off among automotive investors.

The falling NIO share price

NIO was one of many automotive shares whose share value slumped on Tuesday. Ford and Tesla also saw drops of 2% and 1.6% respectively. This was due to growing worries over the global semiconductor shortage. The problem initially arose due to factory closures forced by the pandemic last year. However, since production has reopened, there has been a huge surge in demand for semiconductor chips, outweighing the current supply. As a consequence, NIO suspended production for five days between March 29 and April 2,^ which is likely to equate to a loss of production of between 500 and 1,000 vehicles for the year.

Another reason for the fall in share price is the rise in bond yields the UK and US have seen in recent months. The US 10-year treasury note has risen 67% year-to-date. Bond yields have been historically low for the past 15 years, which leads to hefty stock valuations. As bond yields rise, such valuations tend to lose steam. In addition to this, rising interest rates increase payments on all debts, which makes it harder for businesses to borrow money for growth. This is a large factor behind the tech sell-off that has occurred in the last few months, affecting the NIO share price directly.

Strong Q1 results

All that being said, NIO’s Q1 results in late April did boast some encouraging numbers. Compared to Q1 2020, deliveries were up from 3,838 to 20,060. This marked a sales increase of 489.8%! Gross profit was also up 36.2% from Q4 2020, which is music to any investor’s ears. Net losses also fell to just over £50m, which is a continuation of the firm’s decreasing losses. These ‘positive’ results helped push the NIO share price up to $40 in the week after the report was issued.

CFO Steve Fung also highlighted that more customers are opting for longer-range battery packs and the NIO Pilot Driver Assist System. This helped boost gross margins to 21.2% for Q1, marking a huge year-on-year increase from the -7.4% margin for Q1 2020. CEO William Li has said that the additional cash from increased gross margins will be ploughed back into future technology and other user services. This gives me optimism for the future of the firm.

The Verdict

The reason the NIO share price fell is a combination of the global semiconductor shortage and rising bond yields. NIO is not alone in its semiconductor supply struggle, with many other automotive shares struggling to get their hands on chips. However, the recent Q1 results present a lot of reasons to be bullish about this stock. NIO has proved its scalable business plan, however, future share prices are likely to rest on semiconductor availability.

The post Here’s why the NIO share price fell yesterday appeared first on The Motley Fool UK.

More reading

• Is NIO stock the next Tesla?

Dylan Hood owns shares in NIO Inc. and Tesla. The Motley Fool UK owns shares of and has recommended NIO Inc. and Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Top telecoms?

TalkTalk Telecom Group (LSE: TALK) shares have had a tough 12 months, suffering a 43% fall to 221p. But that could well be overdone, with the shares now on a predicted P/E for the year to March 2017 of 15.6, dropping to 12.7 a year later. But what does today’s first-quarter update reveal?

Despite a lower customer base, overall revenue has been flat, with corporate revenue up 7.5% and data revenue up 38.5%. The company expects full-year revenue to “grow modestly“, and has reiterated its guidance of headline EBITDA of £320m-£360m. Debt is expected to keep falling, and the firm says its 2017 dividend should be at least in line with 2016’s and covered by cash flow.

The dividend, forecast to yield 7%, does concern me as it wouldn’t be covered by currently-forecast earnings per share, while net debt stood at £679m at year-end — and I don’t see that as optimum use of cash. But, with that low P/E valuation and EPS growth forecasts giving TalkTalk attractively low PEG valuations for this year and next, I think I do see a bargain here — and very possibly a takeover target.

Electronics winner

Shares in Electrocomponents (LSE: ECM) climbed by more than 9% to 282p by midday, after the electronics and engineering distributor released an impressive first-quarter update. Although overall sales only grew by 1%, that did build on a stronger fourth quarter, and showed sales growth slanted towards Europe — though Asian and North American sales are falling.

But is the firm’s focus on Europe a risk in the post-Brexit world? All chief executive Lindsley Ruth had to say was that it’s too early to tell, but the fall in the value of the pound should make the firm’s exports more attractive and should provide a benefit to profits stated in Sterling. One to buy? There’s some uncertainty here, but with the firm’s undemanding P/E of 17.5 this year, dropping to 15.5 next, coupled with expected dividend yields of 4.5% and with EPS growth forecasts, it looks relatively safe for a growth stock.

Silicon success

Shares in IQE (LSE: IQE) have had a rocky ride, losing 44% over the past five years. But a trading statement from the silicon wafer supplier this morning provided a 15% boost, taking the shares to 20.4p. Sales in the first half of the year are expected to be at least 15% higher than in the same half of 2015, with revenues coming from an increasingly diversified range of products and services.

Net debt is reducing thanks to strong cash generation, with £3.5m in license income from joint ventures expected to add to the pot in the half. Chief executive Dr Drew Nelson could barely have sounded more upbeat, telling us that “with the progress being made on new product qualifications, further product developments and with increasing revenue diversity, we remain on track to achieve full year expectations”.

With the shares valued at a mere six times forecast earnings, and two years of EPS growth forecast to follow on from the previous three, IQE is my pick of the bunch here.

The post Three shares to buy after today’s updates? appeared first on The Motley Fool UK.

More reading

• £5,000 invested in Rolls-Royce shares on 17 April is now worth…
• Up 30% in April but still at a 10-year low! Is this the best stock to buy in May?
• 3 REITs to consider as buy-to-let gets tougher in 2026!
• Lost money on Diageo shares? Consider buying this £2.19 FTSE stock to try and make it up
• How much is needed in an ISA to target a £2,764 monthly passive income?

Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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 Beginners’ Portfolio is a virtual portfolio, run as if based on real money with all costs, spreads and dividends accounted for. Transactions made for the portfolio are for educational purposes only and don’t constitute advice to buy or sell.

It can be nice to not look at our portfolios for a while — at least if we return to a pleasant surprise, that is. And when I updated the valuation of the Beginners’ Portfolio last week, I was pleased to see gains in most of our holdings taking us to a 35% gain since inception in 2012, after accounting for all costs and spreads.

Banking brightness?

I was especially pleased to see Barclays (LSE: BARC) coming back a little. At 165p, we’re still on an overall 34% loss, even after including dividends. But Barclays shares have picked up 16% now since their 2016 bottom on 5 April. The falling value of sterling in response to recent strengthening of the EU “Leave” campaign, however, has taken its toll on the banks, and Barclays shares have given up some of their recovery. I see a “Brexit” vote as possibly the biggest threat to Barclays right now — indeed, I fear it would devastate the UK’s banking sector in general.

Looking at Barclays itself, now that the market has had time to digest the true meaning if its recent dividend cut, I see sentiment as definitely having turned for the better. New boss Jes Staley is still in his honeymoon period, and he’s making the best of it to implement changes that will cause short-term pain but should set Barclays up for a stronger long-term future.

Technology boost

After staring the year weakly, shares in ARM Holdings (LSE: ARM) have been regaining ground — from their low of 11 February, they’re back up 12% now to 954p. Overall we’re up only a very modest 3% on ARM, but the shares have been in the doldrums for the past year or so, and as forecasts continue to strengthen we’re seeing a P/E multiple that’s looking increasingly attractive. If forecasts prove accurate, ARM’s P/E would drop as low as 24.5 for the year ending December 2017, and that’s lower than it’s been for years.

There really is no sign of ARM’s earnings growth falling off any time soon. First quarter figures released in April showed a 15% rise in normalised EPS after sterling revenue rose 22%, and the signing of new processor technology licences together with extensions of existing agreements is going strong — in the quarter, 4.1 billion ARM-based chips were shipped, for a 10% year-on-year rise.

And I remain insistent that mobile computing is still in its infancy.

Commodities recovery

Rio Tinto (LSE: RIO) has been a disappointment so far, as I greatly underestimated the depth and duration of the commodities downturn — and the portfolio is 28% down on Rio shares. But things have been starting to pick up, and since their low on 20 January, Rio Tinto shares have regained 23% to reach 1,945p. Figures from China have been better than expected of late, and the prices of some metals and minerals have been on the rise — Rio’s biggest product, iron ore, has been steadily picking up since its low point in December 2015.

I know I’ve said it before, but I really do think we could be past the bottom now for Rio Tinto.

Recovering commodities prices have helped our investment in BP too, with oil’s breaking of the $50 level helping the shares to a 20% rise since 11 February, to 369p, and boosting confidence in the dividend.

A storming rise for Sirius Minerals , to 18.7p, has taken us to a 29% profit so far. It’s still high risk, but multiple off-take agreements for the firm’s potash are helping boost confidence.

A solid recovery from Aviva has given us a 46% gain so far, including dividends, and I reckon this is one with a lot more to come. The shares are on a 2017 P/E of only 8.3, with a dividend yield of 6.2% forecast, and that still looks a steal.

The post Beginners Portfolio: Barclays plc, ARM Holdings plc and Rio Tinto plc take us to a 35% gain appeared first on The Motley Fool UK.

More reading

• At 27 years old, will a cash ISA or Stocks and Shares ISA help build wealth faster?
• Here’s why the stock market may FINALLY crash in May… and I can’t stop smiling
• How could the latest Barclays share buybacks impact investors?
• Where next for the Barclays share price, after Q1 fails to inspire?
• Barclays shares just fell 3% after Q1 results. Is this a buying opportunity?

Alan Oscroft owns shares of Aviva. The Motley Fool UK has recommended ARM Holdings, Barclays, BP, and Rio Tinto. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Undervalued insurance

The insurance sector still seems to be inexplicably in the dumps after the financial crisis, and I reckon there are plenty of bargains to be had. Aviva (LSE: AV) remains my favourite, even though the share price has stubbornly stagnated since I bought some — despite a recent rally, it’s still down 13% over the past 12 months, at 450p.

And that’s a year in which the company has seen its restructuring strategy coming to fruition. At results time in March, chief executive Mark Wilson said that

“With a Solvency II ratio of 180% and a surplus of £9.7 billion, our balance sheet is one of the strongest and most resilient in the UK market. Over the last four years, we have tripled our economic capital surplus“.

Forecasts suggest a doubling in EPS this year to put the shares on a P/E of under 10, dropping to under nine on 2017 forecasts, and dividend yields of 5.4% and 6.1% are expected for this year and next. I think Aviva could double your money (and mine) in two or three years — providing we don’t leave the EU and plunge into a fresh economic crisis.

A great track record

One approach is to examine our past growth stars and look for ones that are likely to continue, and I think the obvious one is ARM Holdings (LSE: ARM). The designer of the chips that power iPhones and all manner of other devices has seen its shares soar by a stunning 1,025% since the end of 2008, as smartphone mania has taken hold.

For years I’ve been saying that the mobile computing revolution is still in its infancy, and that’s still true today — I doubt we’re seeing even 5% of the processor usage that we’ll have in another 10 years. There’s no guarantee that ARM will still dominate, of course, but while demand for its designs is still climbing and analysts are still forecasting double-digit rises in annual earnings, I can see a lot more share price growth to come.

Oh, and the stagnation of the past couple of years has put ARM shares, at 977p, on a P/E of 25 based on 2017 forecasts — their cheapest for a good few years.

Mining recovery?

Could a recovery in the downtrodden mining sector do the trick for you? It might surprise you to see that I’m considering Anglo American (LSE: AAL) as a candidate for doubling. The South Africa based miner has, after all, suffered from its own internal problems, in addition to the slump in metal and mineral prices, and as a result the share price has lost 80% since the end of 2010.

But since this year’s low on 20 January, we’ve seen a 180% rise to 636p, nearly trebling your money if you managed to get in at the right time. Can it continue?

Well, the prices of some of Anglo’s products have been recovering nicely of late, and analysts are predicting a bottoming in the firm’s declining earnings this year — there’s a 37% EPS rise forecast for 2017, which would put the shares on a P/E of 15.5.

Sustained rises will probably still be needed to keep Anglo’s shares rising, but I can’t help feeling we’ll be looking back at early 2016 as the moment of maximum pessimism and the perfect time to buy.

The post Which will double the quickest, Aviva plc, ARM Holdings plc or Anglo American plc? appeared first on The Motley Fool UK.

More reading

• 3 of the best UK growth, value and dividend shares to consider in an ISA!
• How much do I need in an ISA to cover a £137 monthly energy bill for life?
• Here’s how I’m targeting £13,534 in yearly passive income from £20,000 in this FTSE financial star
• Here’s how long-term investors can benefit from a stock market crash
• Aviva’s share price has left rivals in the dust. Here’s why it’s still good value

Alan Oscroft owns shares of Aviva. The Motley Fool UK has recommended ARM Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

A great prospect

Having said that, Lloyds Banking Group (LSE: LLOY) looks to me like it scores on both counts. The Bank of England’s Prudential Regulation Authority allowed Lloyds to resume paying dividends in 2014, although the cash only amounted to a yield of 1% that year. But in 2015 the bank upped that to 3.1%, which was already back in line with the FTSE 100 average.

And if you buy Lloyds shares now, analysts think you’ll be in for a very nice yield of 6.3% this year on shares priced at 70.2p, rising as high as 7.4% in 2017! That would be covered by earnings around 1.5 times, which is probably comfortable enough. But I wouldn’t like to see it getting any thinner than that, and I don’t see dividends rising any faster than earnings beyond next year.

In its recent first-quarter update, Lloyds reported a “strong balance sheet” with a CET1 ratio up at 13%, and told us its net tangible assets per share were up to 55.2p from 52.3p at 31 December. Coming on top of Lloyds having reiterated its “progressive and sustainable ordinary dividend policy” at full-year results time in February, I see Lloyds shares as a great dividend prospect for now and for the future.

A growth share?

You might think I’m a bit mad for suggesting ARM Holdings (LSE: ARM) as a dividend share. After all, the chip designer is a classic growth investment, with ARM shares up nearly 700% over the past ten years, to 938p — and its forecast dividend yield stands at only a little over 1%.

But what that misses is the rate of growth of ARM’s dividends. Over the past four years, the annual cash payment has been lifted by 29%, 27%, 23% and 25% — and there are further hikes of 16% and 21% forecast for 2016 and 2017 respectively. Those rises might not be enough to keep up with Venezuelan inflation, but they wipe the floor with the UK’s paltry couple of percent.

If you’d bought ARM shares at the start of 2011 at around 460p, you’d have only received 0.6% in dividends that year. But if 2017 forecasts prove accurate, you’ll enjoy a yield of 2.7% that year — you’d be raking in cash close to the FTSE 100 average after just four years, from an out-and-out growth share. Just think what effective yields you’ll be getting if dividends (which are still more than three times covered by earnings) keep on going at this pace for another decade!

Oil is for ever

Finally I come to one that I think is a really obvious long-term cash cow, and that’s Royal Dutch Shell (LSE: RDSB). Shell hasn’t made the same commitment to maintaining its dividend throughout the price crunch as BP, but with oil continuing to creep back up and getting close to $50 a barrel again, it seems increasingly likely that the payments will keep on coming.

With Shell shares at 1,664p, forecast dividends for 2016 and 2017 would yield 7.7% per year, and that’s one of the best in the FTSE 100 at the moment. In fact, though Shell shares have fallen by 19% over the past five years, dividends have actually brought the total return back into positive territory with an 8% gain — and how’s that for the worst oil crisis we’ve seen in decades?

Over the long term, oil prices are going to recover and oil demand will keep increasing. And I don’t see how Shell could not keep on handing out oodles of cash.

The post 3 top dividends for the next decade: Lloyds Banking Group plc, ARM Holdings plc and Royal Dutch Shell plc appeared first on The Motley Fool UK.

More reading

• As the Lloyds share price falls while profits rise, is it time to dump?
• How much is needed in an ISA for an annual income equal to this year’s £12,547 State Pension?
• What next for Lloyds shares after better-than-expected Q1 results?
• Lloyds shares in the spotlight: how should investors navigate the latest drama?
• Here’s how Lloyds shares could climb another 50%… or crash 50%!

Alan Oscroft owns shares of Lloyds Banking Group. The Motley Fool UK has recommended ARM Holdings, BP, and Royal Dutch Shell. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

That’s what Aviva (LSE: AV) revealed along with its 2015 results last month, which also announced a 20% rise in operating profits to £2.7bn aftern ew business value rose 24.5%. The general insurance combined ratio improved to 94.6%, the best in nine years, with fund management profits up by 33% to £105m.

Oh, and the total dividend for the year rose 15% to 20.8p per share after what Aviva called “a highly satisfactory set of results“.

Earnings to double?

With EPS predicted to double in the coming year, with a more modest 10% pencilled-in for 2017, the question I have to ask is… does this look like a firm whose shares should be languishing on a forward P/E of only 9.6 at today’s share price of 447p?

If that’s not easy to answer, how about taking into account dividends, which yielded 4% in 2015, with rises to 5.3% and 6.1% forecast for this year and next, respectively?

No, what I see here is a company whose successful restructuring efforts have been largely overlooked by the markets as institutional investors are still seeing the financial sector as poison. Aviva has gone from having to slash its dividend back in 2012 due to its weakening balance sheet, to having the “strongest and most resilient” balance sheet in the market in less than four years.

What I see here is the best in an overlooked sector, which should provide steady income for decades — and with share price growth likely over the next few years too. I bought some.

Growth star

Turning to a very different company now, I can remember when ARM Holdings (LSE: ARM) was an upstart daring to try to squeeze-in on the chip market dominated by the giants. We were all buying Intel-based PCs, and those new-fangled mobile bricks that posed different requirements were just starting out.

Now we’re looking at 4bn ARM-based chips shipped in Q4 2015 alone, and a share price up 680% over the past 10 years, to 1,008p. ARM has been a cracking growth share, that’s for sure, but is there anything left in it? I say yes, and I think there’s much more to come.

The share price has barely moved for three years, which might put some people off. But in that time, chip volumes kept on climbing, earnings rose nicely, and the modest dividend grew way faster than inflation.

Cheap as chips?

What that’s done is brought ARM’s forward P/E for this year down to 29, dropping to 25.6 based on 2017 forecasts. That’s around twice the FTSE 100 average — but it’s the lowest that ARM shares have been valued at for years, and I see it as a bargain rating. We’re still only in the early days of the mobile computing revolution, and I see a likely exponential rise in the number of connected-up things with ARM-based chips in them in the coming decade.

In ARM then, I see a still-great growth star, which is gradually changing into a future big dividend payer.

The post Are Aviva plc & ARM Holdings plc The Best Bargains In The FTSE 100? appeared first on The Motley Fool UK.

More reading

• 3 of the best UK growth, value and dividend shares to consider in an ISA!
• How much do I need in an ISA to cover a £137 monthly energy bill for life?
• Here’s how I’m targeting £13,534 in yearly passive income from £20,000 in this FTSE financial star
• Here’s how long-term investors can benefit from a stock market crash
• Aviva’s share price has left rivals in the dust. Here’s why it’s still good value

Alan Oscroft owns shares in Aviva. The Motley Fool UK has recommended ARM Holdings and Intel. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Shares in Gulf Marine Services (LSE: GMS) dropped 6.6% today despite strong full-year results. With revenue up 12%, the supplier of self-propelled self-elevating support vessels to the offshore oil and gas business reported a 4% rise in adjusted net profit, with adjusted earnings per share (EPS) pretty much flat. The full year dividend was lifted 9% to 1.6p per share, ahead of forecasts.

In a year in which big oil companies have been tightening their belts on support spending, this looks like a pretty decent set of figures to me, and the firm seems to have no financing problems, with a new $620m debt facility in place in the final quarter and improved borrowing margins reported.

Chief executive Duncan Anderson called this a “solid set of results“, but he did say that last year’s turbulence in the markets is expected to “continue throughout 2016” — and that’s probably partly behind the price fall. Forecasts put Gulf Marine shares on a forward P/E for 2016 of only 3.8, dropping as low as 3.2 on 2017 predictions. With EPS growth expected to resume this year, I see that as far too cheap — even if the apparent oil price recovery takes a little longer to become established.

Wafers with that?

It was full-year results time for maker of semiconductor wafer IQE (LSE: IQE) too, although the share price has remained unchanged at 18.75p at the time of writing. After a slump towards the end of 2015, the shares are now down 19% in 12 months, and again we’re looking at a company on a very low P/E valuation — just 6.6 based on forecasts.

Chief executive Drew Nelson described 2015  as bringing in “another strong financial performance“, after adjusted EPS rose 7%. The firm managed to get its net debt down by 26% to £23.2m, and saw operational cash generation rise by 41%. IQE’s intellectual property portfolio is growing, with over 100 patents now in the field of advanced semiconductor design and manufacture.

Mr Nelson also says IQE is “on track to achieve our expectations for the full year“, and as far as I can see his optimism looks to be well placed.  I think we could be looking at another small cap bargain here.

Pills and potions

Finally, biotechnology specialist e-Therapeutics (LSE: ETX), whose shares gained 9% to 13.5p on the release of full-year results. CEO Professor Malcolm Young told us it was a “very productive year for our discovery platform which continues to exceed our expectations by generating high quality, potent compounds“, adding that some have “the potential to be game changers in immuno-oncology, cancer drug-resistance and anti-infection“.

That certainly sounds like a promising prospect, but the big risk I see is that e-Therapeutics still appears to be some years away from profit, with forecasts suggesting  losses continuing at around the current rate for at least two more years. For the year just ended, operating losses came to £11.6m, and I’m a little concerned that the company’s net cash of £24.8m might not last too long at that rate. However, the firm says is is “well funded to advance its programmes“, and top fund manager Neil Woodford bought some last year.

The post Should You Buy Gulf Marine Services PLC, IQE plc And e-Therapeutics plc After Today’s Results? appeared first on The Motley Fool UK.

More reading

• £5,000 invested in Rolls-Royce shares on 17 April is now worth…
• Up 30% in April but still at a 10-year low! Is this the best stock to buy in May?
• 3 REITs to consider as buy-to-let gets tougher in 2026!
• Lost money on Diageo shares? Consider buying this £2.19 FTSE stock to try and make it up
• How much is needed in an ISA to target a £2,764 monthly passive income?

Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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 Beginners’ Portfolio is a virtual portfolio, run as if based on real money with all costs, spreads and dividends accounted for. Transactions made for the portfolio are for educational purposes only and do not constitute advice to buy or sell.

The past few weeks of market turmoil have knocked the Beginners’ Portfolio back a bit, and we’re now only up 24.6% since inception in May 2012 (including all costs and spreads), compared with 34.3% at the end of 2015. But ironically it’s the “safer” shares that have been hurt the most, with the higher-risk growth constituents holding up well.

High-tech wonders

ARM Holdings (LSE: ARM) has actually disappointed a little since it was added in December 2014. After a promising first few months and a nice price rise, it’s been up and down ever since, and with the price today at 939p we’re looking at no overall movement at all once costs, spreads and dividends are included — the share price itself is up 2.8%.

But there’s nothing at all wrong with ARM’s fundamental performance, after adjusted EPS for 2015 came in 25% ahead of the previous year (with reported EPS actually up 33%). That came from a 19% increase in revenue in sterling terms, after 4bn ARM-based chips were shipped in the final quarter with microcontrollers and mobile device chips growing strongly.

Analysts are predicting a 43% rise in EPS this year, which would take the P/E down to 27 — that’s about double the FTSE average, but it’s the lowest ARM shares have been on for years.

Our investment in Apple (NASDAQ: AAPL) has done better, with a 50% total gain since January 2013, up to $96, thanks in part to the firm’s move to paying dividends. The price has flattened a bit of late, because of the possibility that sales might actually fall back a little this year.

But that’s a very short-term view, and to put it into perspective the company has just posted its biggest quarterly profit ever at $18.4bn after selling 74m iPhones. A vast proportion of the world’s population don’t have smartphones, and as wealth increases they’ll be buying them — and phone junkies will keep upgrading. Looking at that longer-term picture, on a P/E of only around 10.4, Apple shares still look cheap to me.

Plain old bricks

And finally to the portfolio’s biggest winner so far, Persimmon (LSE: PSN), which I added in July 2012 when the whole housebuilding sector looked insanely undervalued. Persimmon was in a strong financial position and was snapping up building land while it was going cheap, and that’s helped it post four years of EPS rises averaging around 50% per year.

The share price has soared to 2,060p today, and after adding in the firm’s special dividends (and deducting all costs), we’re on a 243% total gain. Is it time to take some profit? I don’t think so.

There’s an EPS rise of 28% expected for the year just ended, with results due on 23 February — and a January update told us of a 13% rise in revenue, with 8% more homes completed at a 4.5% higher average selling price. With the shares on a prospective P/E of 13, dropping to under 12 on 2016 forecasts, and dividends set to yield around 5%, Persimmon looks like it’s turning from a growth share into a strong income share.

The post Beginners’ Portfolio: Will ARM Holdings plc, Apple Inc. And Persimmon plc Drive Our Growth Forwards? appeared first on The Motley Fool UK.

More reading

• £7,775 invested in Persimmon shares 5 years ago is now worth…
• Apple stock rises after stellar earnings! I’m getting buying vibes
• Here’s how £20,000 in this overlooked FTSE gem could make investors £9,089 in annual dividend income over time
• How to aim for a brilliant £29,295 yearly passive income starting with just £7.77 a day in an ISA
• £300 a month and 5 high-yielding dividend shares could build a SIPP worth over £175,000!

Alan Oscroft has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Apple. The Motley Fool UK has recommended ARM Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.