Why Analog Devices Stock Topped the Market Today

Sprawling semiconductor company Analog Devices (NASDAQ: ADI) notched a win on the stock exchange Friday, with its shares closing the trading session nearly 2% higher. It was one of two stocks flagged by a major bank as top picks in their sector, which the bank believes will thrive across this year. With that bump Analog Devices beat the S&P 500 index, which rose by barely over 1% today.

A top bank says Analog Devices is the top

That researcher was top-four U.S. bank Citigroup, which before market open published a new take on the present, and potential future, of the semiconductor industry.

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According to reports, the company waxed bullish on semiconductors despite recent (and quite notable) declines. It wrote that April sales for the industry were $55 billion, which was a decrease of more than 11% from March. It pointed out that double-digit drops are seasonal, however, and this one was not far away from its forecast of a 10% fall. Also, zooming out, April sales were 24% higher year over year.

In a more optimistic development, Citigroup wrote, average selling prices saw significantly less erosion than expected. In April they fell by 3.2% month over month, while the bank was anticipating a 5.3% drop.

Time to play defense

The environment for semiconductors should improve as the year wears on; Citigroup maintained its forecast of an 8% increase over 2024's level.

To take advantage of this, the bank believes that Analog Devices and its peer Texas Instruments are the best picks, as they are defensive stocks in a tough environment. I would buy that argument, particularly since Analog Devices has an admirably wide product range and as such has something of a natural hedge in its business.

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Citigroup is an advertising partner of Motley Fool Money. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Texas Instruments. The Motley Fool has a disclosure policy.