4 Chip Stocks Smart Money Is Buying

NEW YORK ( TheStreet) -- Executives at semiconductor companies have been talking about a "bottom" in the cycle, and smart investors have heeded the call, snatching up shares of various chip-makers during the fourth quarter.

Semiconductors, used in everything from computers to mobile phones to automobiles, are generally seen as a barometer for the economy. Stronger sales of semiconductors indicate a stronger economy.

Companies such as Texas Instruments ( TXN), Broadcom ( BRCM), and AMD ( AMD) have noted that enterprise spending is along a bottom, and the economy seems to be picking up.

Read on for four semiconductor stocks that smart investors were adding during the fourth quarter.

Texas Instruments

When Texas Instruments reported its fourth quarter results, CEO Rich Templeton said he believes that the company is at the bottom of the semiconductor cycle. TI reported earnings of 41 cents per share excluding items, on fourth quarter revenue of $3.42 billion. Wall Street analysts polled by Thomson Reuters expected earnings of 39 cents per share on $3.25 billion.

Major investors such as George Soros, Highbridge Capital, Paul Tudor Jones, Steve Cohen of SAC Capital and Citadel Advisers were adding or initiating stakes in Texas Instruments during the fourth quarter.

Particularly of note was Soros, who increased his position by 500,000 shares to 600,000. Highbridge, the hedge fund owned by J.P. Morgan, initiated a stake of 159,500 shares, while Tudor Investments started a stake with 144,100 shares.

Texas Instruments shares gained 9% during the fourth quarter, and are off to a strong start in 2012, up 15.8% year-to-date.

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Intel is the biggest semiconductor company in the world, and investment managers such as Warren Buffett, D.E Shaw, and Goodman & Co. all added shares during the fourth quarter.

Warren Buffett initiated a stake in the Santa Clara, Calif-based chipmaker during the third quarter. Buffett had previously eschewed investments in technology, but Intel enjoyed its most profitable year in 2011, which perhaps changed Buffett's mind. He added nearly 2.1 million shares during the quarter to bring his total investment to 11,495,000 shares.

Hedge fund D.E. Shaw, led by David Shaw, upped its stake by 1,113,046 shares to bring the funds total holdings to 4,284,699 shares. Goodman initiated a position during the quarter by buying 871,700 shares.

Intel shares gained 13.7% during the fourth quarter and are up 9.6% so far in 2012.

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Broadcom saw inflows from quant funds as well as two of the world's largest hedge funds, as they bet on a rebound in shares of the chipmaker.

Unlike Texas Instruments and Intel, Broadcom is more closely associated with mobile chips, though not on the scale of Qualcomm ( QCOM). Both Broadcom and Texas Instruments make chips for the Apple ( AAPL) iPhone.

Renaissance Technologies is one of the most well-known quant funds around, and the New York-based firm initiated a stake in the company during the fourth quarter, adding 1,740,457 shares. Renaissance was founded by James Simons, and employs a mathematical approach to picking stocks.

Other well known hedge funds buying Broadcom were D.E. Shaw, and the world's largest hedge fund, Bridgewater Associates, run by Ray Dalio. D.E. Shaw purchased 919,861 shares to bring its total position to 1,186,940 shares during the quarter, while Bridgewater added 453,398 shares for a total position of 642,538 shares.

During the fourth quarter, Broadcom lost 11.8% of its value. Shares have changed trajectory since the start of 2012, up 28.4% year-to-date.

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AMD has been struggling to try to compete with behemoth Intel in the chip space, and the company has suggested recently it may be open to other architectures as it tries to differentiate itself from Intel. Both AMD and Intel offer x86 architecture, as opposed to ARM-based chips, which consume less power.

Hedge funds such as D.E. Shaw and Highbridge Capital have raised their stakes that AMD will gain traction in the coming year, as both hedge funds added to their positions during the fourth quarter.

D.E. Shaw added 147,737 shares during the quarter, while Highbridge initiated a position of 96,241 shares during the quarter.

AMD shares have rewarded D.E. Shaw and Highbridge and other investors so far this year, gaining 38.7% year-to-date.

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Interested in more on AMD? See TheStreet Ratings' report card for this stock.

>>To see these stocks in action, visit the 4 Chip Stocks Smart Money Is Buying portfolio on Stockpickr.

Check out our new tech blog, Tech Trends.

-- Written by Chris Ciaccia in New York

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