Bear Market Doesn’t Undercut Positive 2012 Picture for Undervalued Tech Stocks (BRCM, NETL, CAVM, EZCH, MRVL, AAPL)

Just as the markets were peaking in July, Next Inning Editor Paul McWilliams advised investors to audit risk exposure in preparation for what he described then as a significant increase in volatility and his view of what he thought would be a downward trending market. In subsequent posts, he predicted with high confidence all we would see in the near future would be relief rallies.

McWilliams has maintained a tight focus on defining near-term risks and balancing that with his predictions of specifically what catalysts he thinks will flip the market into a bull mode. He has also helped his readers quantify risks by providing an eight point outline that has accurately predicted the risk elements that have led particular stocks to post new 52-week lows. Out of those, though, he has written carefully and in length about the hidden jewels investors should consider for a strong 2012 rebound.

Next Inning readers remember well that McWilliams very accurately predicted not only the flip to a bull market following the last crash, but also prospered from the ideas he shared in his special report titled, “Undervalued Tech Stocks for 2009.” In this cycle, McWilliams is much more picky and covering his thoughts in his highly acclaimed “State of Tech” reports that cover the tech sector from wafer fabrication to finished goods.

Further softening in demand from wire-line and wireless providers entering the fourth quarter, political and economic unrest in Europe and Middle East, slowing growth in China, and political stagnation in the United States are all weighing negatively on markets, according to McWilliams’ recent Strategy Update.

With the current macroeconomic environment as a backdrop, Next Inning’s most recent State of Tech report analyzing the Specialty Semiconductor sector provides guidance from McWilliams as to several stocks that remain strong bets for 2012:

– “I think Broadcom (BRCM) is executing very well in its product strategy outside the one glaring weakness it has in mobile communications in developing or acquiring a viable applications processor,” McWilliams said. Broadcom last month moved to address its need for am Knowledge Based Processor with its plans to acquire NetLogic Microsystems (NETL).

– “Most of Cavium’s (CAVM) design base has yet to roll into production within its enterprise and service provider applications where design and qualification cycles are long,” he said. A “desperate bottom” scenario could drive Cavium into the low $20s, or even high teens. With the Cavium growth story still in its early stages, McWilliams believes NetLogic shareholders should consider swapping for Cavium anytime it can be done at a ratio of 1.8 or more Cavium shares for each NetLogic share.

– “EZChip Semiconductor (EZCH) remains one of the very few small-cap tech stocks I feel comfortable holding as a strategic investment in this economic environment. I continue to believe EZchip is positioned to generate about $250 million in annual revenue by mid-decade from only its NP series of network processors,” he said. “A price dip into the mid to low $20s, however, is possible if things get really nasty.”

– “I have no intent to lower my risk exposure to Marvell Technology (MRVL), and will most likely add shares on substantial weakness,” McWilliams said. Next Inning believes the long-term growth story for Marvell is solid, even without considering the potential impact of its gaining a design win at Apple (AAPL), where the market’s most highly valued company recently added code to its complier in support of Marvell’s new quad-core Armada XP processor.

Next Inning readers enjoy very clearly presented actionable commentary about tech industry trends and how these trends will impact the companies you might be considering as investments. In addition to this commentary, you’ll also get the benefit of Paul’s deep value analysis and his coverage of emerging tech companies that Wall Street has yet to discover.

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Tags: AAPL, BRCM, CAVM, EZCH, MRVL, NETL