“No man ever steps in the same river twice.”

Those words were uttered by the ancient Greek philosopher Heraclitus (circa 500 BCE), who was best known for his doctrine of “universal flux.” The only constant in life, he taught, is constant change.

Emblematic of constant change is the technology sector.

The Silicon Valley “story stocks” hog the attention on CNBC, but the best investments often lack media glamour. Which brings me to Dallas-based Texas Instruments (NSDQ: TXN).

Texas Instruments traces its origins to Geophysical Service Inc., which was founded in 1930 to use seismology to explore for petroleum deposits. In 1951, the firm became Texas Instruments. From these humble beginnings, Texas Instruments in 1954 invented the silicon transistor.

Today, as the financial press obsesses about Internet stocks such as Facebook (NSDQ: FB) and Netflix (NSDQ: NFLX), chipmaker Texas Instruments is bigger and more diversified than many investors realize.

Is Texas Instruments a smart bet now? Or is the semiconductor industry too vulnerable to a downturn? Let’s weigh the pros and cons of Texas Instruments as a company and see whether you should buy or avoid the stock in 2019.

What Is Texas Instruments?

With a market cap of $101.3 billion, Texas Instruments is a leading designer and manufacturer of analog and digital semiconductors with a broad catalog of products.

Texas Instruments generally operates in two segments, Analog and Embedded Processing. Analog offers power management products such as batteries, portable energy components, high-voltage power supply controls, and switches and interfaces.

Embedded Processing serves the industrial and automotive markets, offering microcontrollers and wireless connectivity solutions that are used in electronic equipment to sense, connect, log, and transfer data.

The company also makes calculators; provides components used in projectors to create high-definition images; and application-specific integrated circuits.

How Has Texas Instruments Stock Performed?

What Is Texas Instruments Stock History?

• Over the past 12 months, TXN has gained 1.8% whereas the S&P 500 has gained 2.3%.
• Over the past two years, TXN has gained 38.8% whereas the S&P 500 has gained 17.2%.
• Over the past five years, TXN has gained 138.6%, the S&P 500 has gained 49.2%, and the benchmark iShares PHLX Semiconductor ETF (SOXX) has 138.8%.

How Has Texas Instruments Stock Performed In 2017/2018?

• In 2017, TXN gained 41.9% whereas the S&P 500 gained 19.4%.
• In 2018, TXN lost 10.4% whereas the S&P 500 lost 7.5%.

Who Are Texas Instruments’ Rivals?

Intel (NSDQ: INTC)

With a market cap of $231.1 billion, Intel is the largest maker of semiconductors in the world, but the migration away from PCs toward smartphones has hurt the company.

Intel’s PC business remains its biggest operating unit, accounting for two-thirds of sales. Intel is likely to continue its dominance of the PC microprocessor market over the long haul, thanks to a strong research and development (R&D) budget.

Intel also is devoting considerable resources to developing new, ever-faster chips for smartphones. However, Intel has come late to the mobile device party.

Advanced Micro Devices (NSDQ: AMD)

Advanced Micro Devices (market cap: $24 billion) makes microprocessors, motherboard chipsets, embedded processors, central processing units (CPUs), and graphics processing units (GPUs).

AMD is what’s known as a “foundry,” making chips for designers without factories (aka “fabs,” hence the term fabless).

Read This Story: AMD Stock Prediction In 2019 (Buy or Sell?)

Qualcomm (NSDQ: QCOM)

Qualcomm (market cap: $62.9 billion) is a semiconductor and telecommunications products maker.

The company’s ownership of vital chipmaking intellectual property means that whenever a manufacturer sells a handset with a QCOM chip that delivers high-speed data connections, Qualcomm reaps a royalty on the sale, regardless of the device’s brand.

Read This Story: Our Qualcomm Stock Prediction In 2019 (Buy or Sell?)

Will Texas Instruments Go Up In 2019 (Should You Buy)?

Texas Instruments presents a Texas-sized opportunity for investors, based on the company’s methodical business model and its long-term growth prospects.

This video provides a quick summary of Texas Instruments, from its early days to the present.

The future continues to look bright for Texas Instruments, given TXN’s move toward 300-millimeter circuit wafers. These chips allow more circuits to be placed on a smaller space and cost less to make than the more common chip size favored by the industry.

Like its main rivals, Texas Instruments has been diversifying into breakthrough technologies, to serve customers in virtual/augmented reality (VR/AR), artificial intelligence (AI), cloud computing, self-driving cars, and the Internet of Things (IoT).

Texas Instruments is seeing rapid growth of its automotive and industrial sectors that together have become the dominant portion of its total business.

What sets Texas Instruments apart from its competition is the reliable execution of its long-term business plan, which is focused on efficiency and attention to detail.

The company continues to benefit from falling manufacturing costs, rising demand for its products, and its aggressive deployment of the 300-mm wafer. Because Texas Instruments owns its mostly paid-for manufacturing plants, its costs are lower than those of its competitors, which often use contract labor or lease space for production.

Texas Instruments plans for factory expansion several years in advance based on its analysis of future trends. For the next decade’s expected demand, the company’s factories and facilities are either on the drawing board or getting built now, with future costs already factored in.

This strategic planning gives Texas Instruments a huge advantage over its competition, which has been slow to move toward the 300-mm wafer size. Texas Instruments’ efficiency acts as a multiplier for its revenues and earnings, especially when placed in the context of the company’s consistent top and bottom line growth.

Texas Instruments’ foray into IoT is a major tailwind for the company.

One of the most promising investment opportunities today is IoT, by which everyday objects are integrated into a data-sharing network. The personal computer, the smartphone and the Internet revolutionized society. We’re now on the threshold of another epochal transformation: IoT.

IoT devices exchange information with each other via a central server, without a human being as intermediary. They use sensors to communicate actionable data, such as fuel levels, room temperatures or inventory capacities, through a wired or wireless network to a software application.

IoT is giving birth to smart homes and utility meters, driverless cars, self-calibrating medical devices…you name it. IoT also automates warehouses, supply chains, and the delivery of services and billing.

Texas Instruments is far ahead of competitors with its design of 300-mm wafers, which serve as the housing for many high-end chips necessary for IoT to function. Texas Instruments also is making inroads into the industrial and automotive sectors with embedded circuits known as “brain chips.”

With a healthy dividend yield of 2.88%, the company provides a combination of growth and income. Indeed, my prediction is that Texas Instruments is on track to become a Dividend Aristocrat. This distinction would add ballast to any portfolio.

To be sure, Texas Instruments is a growth stock. But the Dividend Aristocrats provide fertile ground for income investors. To earn the title Dividend Aristocrat, a company must have raised dividends for at least 25 years. The company also must have a dividend policy that increased its dividend every year for those 25 years.

These dividend powerhouses make up the S&P 500 High Yield Dividend Aristocrat Index. This is an official index of the 50-plus highest dividend yielding stocks in the S&P Composite 1500. This Aristocrat Index is maintained by Standard & Poor’s. Every December, S&P updates the list.

A Dividend Aristocrat tends to be a blue-chip company with a strong balance sheet. TXN fits the bill.

Many of these Aristocrats are familiar names. They make household brands. Because of their financial strength, they can weather the sort of market turbulence that probably lies ahead in 2019.

Paying out only 41% of free cash flow in dividends, Texas Instruments has considerable room for additional dividend growth over the long term. Texas Instruments has greatly boosted its dividend over the last 15 years, with large recent dividend increases. The company hiked its payout by 29% in 2017 and 24% in 2018.

Texas Instruments sports a 12-month forward price-to-earnings ratio (FPE) of 18.5, lower than Advanced Micro Devices (24.4) and not much higher than the S&P 500 (17.5), but significantly higher than Intel (10.8) and Qualcomm (11.9). However, the latter two rivals are struggling and face weaker growth prospects than TXN.

Will Texas Instruments Go Down In 2019 (Should You Sell)?

Prudent investors always weigh the bear case. What’s the pessimistic view of Texas Instruments?

For starters, the technology sector is getting a lot riskier.

Ballooning public and private debt, trade conflict, rising interest rates, mounting inflation, political dysfunction, and geopolitical tensions are tipping the scales in favor of value over growth stocks.

Overvalued momentum stocks, especially the mega-cap technology stars, are losing steam. They’re ceding their leadership position to value stocks in sectors more appropriate for the late stage of a recovery, such as industrials, consumer staples, energy, utilities, and health care. Texas Instruments could get caught in the downdraft.

Some analysts also express concerns that the semiconductor industry is ripe for a fall as demand slows for tech products such as smartphones. The apparent glut of chips could clobber the shares of major chipmakers such as Texas Instruments.

Overall Texas Instruments Forecast And Prediction For 2019

Texas Instruments is a lean and mean free-cash-flow generating machine with a growing book of business in a sector that should resume growth this year.

Pessimists who point to a glut of chips are overstating the case; the sector has racked up torrid growth and was due for a breather. Over the long haul, the tech sector should enjoy sustained demand through the emergence of breakthrough technologies in the fields of VR/AR, autonomous vehicles, the cloud, AI, and IoT.

Texas Instruments consistently invests in organic growth and remains a big spender on R&D. This farsightedness has been paying off, as its past stock performance shows.

Texas Instruments boasts several core advantages, including manufacturing prowess in 300-mm chips, which provide greater production efficiencies; a broad product portfolio; and a widespread sales channel.

Much-hyped Internet stocks, such as the FAANGs, are poised for another tumble this year as unrealistic growth expectations collide with reality. But Texas Instruments should maintain its footing.

Texas Instruments is a growth-and-income stock that belongs in any retirement portfolio.

John Persinos is the managing editor of Investing Daily.