Here, we focus on identifying stocks that have experienced (and perhaps will soon) a 10% price pullback from recent highs, presenting potential buying opportunities. This 10% pullback strategy is based purely on technical analysis, especially price action, without delving into the underlying fundamentals of the companies. We aim to uncover stocks that are showing signs of recovery or consolidation, offering traders a chance to enter at a potentially discounted price. Please refer How to Choose Stocks for the 10% Pullback Strategy to choose stocks that are safer for using the 10% pullback strategy, ensuring that you’re buying into companies with solid fundamentals and long-term growth prospects.
Weekly Analysis
*Updated: 15 Mar, 2025
Buy Stock During Market Correction
| Stock Price | Remarks | |
|---|---|---|
| Recent High | 220.39 | 8 Nov, 2024 |
| 10% | 198.35 | 1/3 of capital, set TP: 216.21 |
| 20% | 176.31 | 1/3 of capital, set TP: 198.35 |
| 30% | 154.27 | 1/3 of capital, set TP: 176.31 |
| Target Price | 216.21 | sell remaining stocks |
| Support 1 | 172.31 | |
| Support 2 | 135.68 | strong |
Why Buy TXN Stock
Investing in Texas Instruments Inc. (TXN) for the long term can be appealing for several reasons, based on its financial performance, market positioning, and growth potential. Below are some key reasons why Texas Instruments is considered a good long-term investment:
1. Strong Financial Performance
- Consistent Revenue and Profit Growth: Texas Instruments has demonstrated consistent revenue and profit growth, driven by its broad product portfolio in semiconductors and its ability to maintain profitability even in cyclical industries.
- High Margins: The company is known for its healthy profit margins, especially in its analog and embedded processing segments, which are less susceptible to price wars and are a large part of its portfolio.
- Dividend History: TXN has a strong track record of returning value to shareholders through dividends. The company has increased its dividend consistently, making it a good option for dividend-seeking investors.
2. Market Leadership in Analog and Embedded Processing
- Analog Market Leadership: Texas Instruments is one of the largest players in the analog semiconductor market. Analog chips are essential in various industries, including automotive, industrial, consumer electronics, and telecommunications.
- Embedded Processing: Embedded processing is another key business for TXN. These chips are crucial in devices that require real-time data processing, such as automobiles, industrial equipment, and consumer electronics.
- The growing demand for these technologies, especially with the rise of electric vehicles, industrial automation, and the Internet of Things (IoT), positions TXN well for future growth.
3. Diverse Product Portfolio
- Wide Applications: The company’s semiconductor products are used in a wide range of industries, making it less vulnerable to downturns in any single market. This diversification across sectors such as automotive, industrial, communications, and consumer electronics helps TXN maintain stable growth.
- Focus on High-Value Segments: Texas Instruments has shifted its focus towards high-margin products, such as analog semiconductors, rather than commodity chips. This strategic decision reduces its exposure to price volatility and competition from low-cost producers.
4. Strong Cash Flow and Capital Allocation
- Free Cash Flow: TXN has robust free cash flow generation, which provides the company with ample resources to reinvest in business expansion, reduce debt, or return capital to shareholders through dividends and share repurchases.
- Efficient Use of Capital: Texas Instruments has a history of capital discipline. The company is known for making strategic acquisitions, and for reinvesting its profits back into its business for growth opportunities, rather than pursuing unnecessary expansion.
5. Competitive Advantage
- Technological Innovation: Texas Instruments invests heavily in research and development (R&D), which allows it to maintain a competitive edge in developing new technologies and improving its existing products.
- Economies of Scale: TXN’s scale allows it to produce chips at lower costs than many smaller competitors, giving it a price advantage.
- Brand Recognition: TXN is a recognized and trusted name in the semiconductor industry, known for producing high-quality and reliable products. This reputation allows the company to secure long-term contracts with major players in various industries.
6. Long-Term Growth Opportunities
- Automotive Industry: Texas Instruments has significant exposure to the automotive sector, which is increasingly relying on semiconductors, especially for electric vehicles (EVs), autonomous driving, and advanced driver-assistance systems (ADAS). The transition to EVs and smart cars presents a long-term growth opportunity.
- Industrial Automation: The push toward smart factories, the Industrial Internet of Things (IIoT), and automation has created substantial demand for embedded processing and analog chips, which Texas Instruments is well-positioned to supply.
- 5G and IoT: The rollout of 5G technology and the expansion of IoT applications are expected to drive demand for the types of semiconductors that Texas Instruments specializes in.
7. Resilience in Market Cycles
- Cyclical Nature of the Industry: The semiconductor industry is known for its cyclicality, but Texas Instruments has managed to weather downturns better than many of its competitors due to its focus on analog chips and its diversified customer base.
- Counter-Cyclical Growth: Texas Instruments’ products are often designed into long-lifecycle products, which means demand tends to be more stable, even during downturns, compared to companies focused on fast-moving consumer products.
8. Strong Management and Strategic Vision
- Experienced Leadership: TXN has strong and experienced leadership with a clear vision for the company’s long-term strategy. Its management has consistently executed its plans and maintained a steady focus on profitability, innovation, and long-term growth.
- Disciplined Approach: The company’s approach to capital allocation, including prudent R&D investment and shareholder returns, has contributed to its consistent outperformance.
9. Attractive Valuation
- Reasonable Price-to-Earnings Ratio: Texas Instruments often trades at a premium to its competitors due to its strong financials and market position. While its price-to-earnings (P/E) ratio may be higher than the industry average, its consistent earnings growth and strong fundamentals justify the premium in the eyes of long-term investors.
- Stable and Predictable Earnings: Given its focus on analog chips, which have steady demand, Texas Instruments is perceived as a more predictable company than those dependent on more volatile semiconductor sectors.
Conclusion
Investing in Texas Instruments for the long term could be a solid choice due to its market leadership in analog and embedded processing, consistent financial performance, and strong growth prospects in high-demand sectors like automotive, industrial automation, and IoT. The company’s strong cash flow, efficient capital allocation, and resilience during market cycles also contribute to its long-term potential. For those who prioritize stability, dividend growth, and a well-established company with a solid strategic vision, Texas Instruments may be an excellent option to consider for a long-term investment portfolio.