Specialized Chipmakers, the Modern Architecture Play

As soon as I set foot in the Robbie Stephens Semiconductor Conference, I got the willies. It reminded me of the 10 years I spent as a sell-side analyst tracking semiconductors, a.k.a. "riding the roller coaster." These chip stocks were awesome short-term trading vehicles but had the unfortunate habit of going down when they were supposed to go up -- and vice-versa.

For much of that time I was pitching Intel (INTC Quote) as a long-term investment, but I would spend all my time figuring out whether it would hit a brick wall the next quarter. Over the years, Intel was far more than a 10-bagger, but the game was all about figuring out the cycles, and the ride caused severe whiplash. I came to hate semiconductors, and never wanted to think about them again. I figured I had better start doing something else so I wouldn't end up with gray hair and ulcers.

I was reminded of all this last week, when Micron's (MU Quote) stock shot up nearly 18% after investor-relations exec Kip Bedard mentioned that spot prices were above $6 and had been there for a few days. That's right, days. In the past 12 months, the stock has been as high as 80 and as low as 20 and now is near 70 again: living proof that you rent these stocks -- you don't own them.

In our fund's quarterly newsletter, we like to report the makeup of our fund by segment: software, network equipment, etc. Lo and behold, 40% of our portfolio is invested in companies considered semiconductor companies. Another 20% is invested in companies whose secret sauce is a semiconductor with software running on top of it. Thus I'm back to being up to my eyeballs in chips: Am I nuts? ...