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what happened
Many hardware-focused stocks in the technology sector have posted a quiet stream of strong gains through July 2022, leading to monthly price gains of 16 percent or more. Here are three illustrative examples based on data from S&P Global Market Intelligence.
|
Stock |
Total profit in July 2022 |
The biggest one-day profit in July 2022 |
|---|---|---|
|
Amphenol (APA 0.04%) |
19.8% |
7% |
|
Skyworks solutions (SWKS -0.76%) |
17.5% |
4.3% |
|
Corning (GLW -1.89%) |
16.7% |
4.3% |
On the other hand, S&P 500 (^GSPC -0.16%) The market index increased by 9.1% in the same period. The S&P 500’s biggest one-day move was a 2.7% gain, down on a day when Corning and SkyWorks were top performers.
so what
The hardware stocks listed above floated in July without making headline-grabbing waves. I’m not saying practice total radio silence. Two of the three companies reported quarterly results in July, and their press rooms cut back on the usual barrage of product announcements and partnership deals. None of these company-specific developments have dampened the fires that have raged in these stocks over the past month.
For example, the US Federal Communications Commission (FCC) opened another auction for 5G wireless spectrum licenses around the end of July. That’s great news for Skyworks, whose signal processing chips can be found in 4G and 5G base stations and end-user devices around the world. But the stock was up 1.1% on the day, lagging the S&P 500’s 1.5% jump.
Cable and antenna maker Amphenol reported results on the same day. The company posted double-digit revenue and earnings percentage gains compared to last year. The results also beat Wall Street expectations across the board. The report sparked Amphenol’s biggest one-day jump of the month, but the event still accounted for less than half of the stock’s monthly gain.
Glassware veteran Corning reported strong second-quarter results earlier that week. Sales and earnings were in line with expectations, but third-quarter guidance was modest due to inflation and weak demand for products such as smartphone screens, car windows and solar panels. Investors shrugged off the gloomy guidance, sending stock prices 2.9% higher on the day, while the S&P 500 rose 2.6%.
Still, these individual events weren’t the main fodder for this triple jump in July. The hardware majors on my list have made big price cuts in the first half of 2022, setting them up for a dramatic recovery with the slightest hint of positive market news.
GLW data by YCharts
Now what
In the year The persistent bearish pressure in early 2022 turned to mild optimism in early July. During the month, sentiment brightened further due to positive earnings reports and economic metric readings. Similar growth stocks that have seen punitive price cuts over the past six months are poised to bounce back. That’s a great backdrop behind July’s strong growth for investors in Corning, SkyWorks and Amphenol.
Will higher prices stick or are we waiting for the bear market to resume? Of course, only time will tell, but the main causes of the first half price reduction are fading. Core inflation has eased somewhat over the past three months, the semiconductor industry is showing signs of a healthy manufacturing pipeline, and shipping costs have begun to decline again. In addition, the US government is taking steps to support the domestic semiconductor industry and related businesses. That doesn’t happen every day (hardly every decade), and all three hardware stocks will benefit from that momentum.
Bullying trend can always hit another problem, but things are going in the right direction. The hardware makers on my list look like canaries in the coal mine, currently weathering storms to demonstrate their good health.
Anders Bylund has no position in the mentioned shares. The Motley Fool recommends solutions from Corning and SkyWorks. The Motley Fool has a disclosure policy.
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