The Alpha Algorithm Returns to a Semiconductor Play

This week’s Alpha Algorithm recommendation increases your bet on the technology sector as it recovers from a summer sell-off.

Founded in 1980 and headquartered in Fremont, California, Lam Research Corporation (LRCX) designs, manufactures, markets and services semiconductor processing equipment used in the fabrication of integrated circuits.

Lam Research Corp (LRCX) versus the S&P 500 over six months

10 Top Investment Strategies Betting on Lam Research Corporation (LRCX)

1. Exponential Technologies

The stock is part of a strategy that invests in nine different fields deemed to be vast growth “exponential technologies”: big data and analytics, nanotechnology, medicine, networks, energy and environmental systems, robotics, 3-D printing, bioinformatics and financial services.

2. Momentum Factor

The stock is one of the top 120 large- and mid-cap U.S. stocks exhibiting relatively higher price momentum, as measured by a specific factor which historically has driven a significant part of companies’ risk and return.

3. Large-Cap Alpha Growth

The company is part of an alpha-seeking index that selects and weights growth stocks from the S&P 500 Growth Index. The proprietary methodology uses price appreciation — among more traditional factors — and weights the constituents based on their respective growth scores.

4. Pure Growth

The company is part of a strategy that selects companies from the S&P 500 Index, based on three growth factors: current internal growth rate, historical earnings per share (EPS) growth and historical sales/share growth.

5. Large-Cap Alpha Core

The stock is one of a tiered, equal-weighted index of large-cap stocks selected from the S&P 500 and is expected to outperform the broader large-cap space based on an intricate methodology of ranking stocks according to their recent performance.

6. Large-Cap Growth

The stock is among the top 50 large-capitalization U.S. growth stocks generated through a rigorous 10-factor fundamental screening process.

7. IBD Top Fifty

The company is a Top 50 stock based on Investor’s Business Daily’s proprietary trading formula to identify 50 stocks that meet one of seven different catalysts. The “CAN SLIM” strategy identifies companies with either fundamental (improving earnings or new product) or technical (upward stock move on strong volume) catalysts.

8. Knowledge Leaders

The stock benefits from the “knowledge effect” — the tendency of innovative companies to outperform — and is selected by adjusting historical financial statements to obtain its level of “knowledge capital.”

9. Value Line 100

It is one of the top 100 stocks in the universe of 1,700 stocks for which Value Line gives a #1 ranking in the Value Line Timeliness Ranking System, based on expected price performance over the following six to 12 months.

10. Insider Sentiment

It is one of 100 stocks chosen from the S&P 1,500 based on positive sentiment among those “insiders” closest to a company’s financials and business prospects, such as top management, directors, large institutional holders and the Wall Street research analysts who follow the company

Recommendation

Buy Lam Research Corp (LRCX) at market today. Place your initial stop at $155.00.

Options

If you want to play the options, I recommend the LRCX December 2017 $170 calls (LRCX171215C00170000), which last traded at $11.06 and expire on Dec. 15.

Portfolio Update

You stopped out of Apple (AAPL) on Sept. 8 at $159.25 for a 10.48% gain.

Raise your stop in Visa (V) to $103.80 to lock in a 15% gain.

Sell your Amazon.com (AMZN) September $1000 calls at a loss. Recall that you sold one-half of these options on July 27 for a 72.92% gain.

Sincerely,

Nicholas A. Vardy