Short Sellers Continue to Pile on KLA-Tencor (AMAT, KLAC, TXN)

Among the semiconductor stocks, Applied Materials AMAT, KLA-Tencor KLAC and Texas Instruments TXN saw the most significant rise in short interest between the June 28 and July 15 settlement dates. The number of shares sold short in Intel INTC and Micron Technology MU also grew somewhat during that period. However, short sellers retreated from Advanced Micro Devices AMD, ARM Holdings ARMH, Broadcom BRCM, LSI LSI, Marvell Technology MRVL, Nvidia NVDA, Qualcomm QCOM and STMicroelectronics STM in early July. See also: Short Sellers Jump on ARM Holdings, Broadcom Here we take a closer look at how Applied Materials, KLA-Tencor and Texas Instruments have fared and what analysts expect from them. Applied Materials This equipment and services provider to the semiconductor industry saw short interest increase more than 15 percent in early July to around 19.91 million shares. That was the greatest number of shares sold short since February. The short interest was still less than two percent of the float. Applied Materials predicted that its profit would at least double in the next four years. The company has a market capitalization of more than $19 billion and a dividend yield near 2.4 percent. The long-term earnings per share (EPS) growth forecast of this S&P 500 component is about nine percent, and the return on equity is in the red. Nine of the 19 analysts who follow the stock and were surveyed by Thomson/First Call recommend buying shares, three of them rating the stock at Strong Buy. The mean price target is about the same as the current share price, meaning analysts see no upside potential at this time. The share price has pulled back more than three percent from a recent 52-week high. But it is still more than 25 percent higher than six months ago. In that time, the stock has outperformed the broader markets, as well as competitor KLA-Tencor. KLA-Tencor This maker of semiconductor and LED production equipment saw short interest jump more than 26 percent during the period to more than 6.69 million shares. That was on top of a 37 percent rise in the previous period. The short interest was about four percent of the float, and days to cover rose to more than three. KLA-Tencor named a new chief financial officer and hiked its dividend during the period. The company has a market cap of almost $10 billion and a dividend yield near 2.7 percent. The long-term EPS growth forecast of this S&P 500 component is about 10 percent. The operating margin is better than the industry average, and the return on equity is more than 19 percent. Of the 16 polled analysts, 11 recommend buying shares, while just one rates them at Underperform. But the mean price target, or where the analysts expect the share price to go, is only a little higher than the current share price. The street-high price target suggests more than 12 percent upside potential. Note that shares reached a multiyear high this week. The share price is up more than seven percent in the past month, and more than 24 percent higher than a year ago. But over the past six months, the stock has underperformed the broader markets and competitor Applied Materials. Texas Instruments Short interest in this Dallas-based company grew almost 11 percent in the first two weeks of July to around 23.65 million shares, and it has risen for three consecutive periods. The number of shares sold represented about two percent of the float, though days to cover rose to more than three. During the period, Texas Instruments launched a new low-power RF transceiver. The company has a market cap of about $43 billion and a dividend yield near 3.0 percent. The long-term EPS growth forecast of this S&P 500 component is less than eight percent, and the return on equity is more than 16 percent. See also: Texas Instruments Rises on Q2 Results The consensus recommendation of the analysts surveyed is to hold Texas Instruments shares, and it has been for at least three months. The share price has overrun the analysts' mean price target, which means on average they see no upside potential at this time. The share price is more than 11 percent higher over the past month and reached a multiyear high earlier this week. It is more than 46 percent higher than a year ago. Over the past six months, the stock has outperformed competitors Qualcomm and STMicroelectronics, as well as the Nasdaq and S&P 500.