Could 2027 Be the Year Semiconductors Finally Cool Off?
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.
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