At Thompson Wealth Management, we work hard to diversify our clients’ portfolios in order to achieve the highest returns in these uncertain times. We not only look at sectors that appear to have the best chance of producing the most percentage increase over the next year but we look within sub-sectors for companies with specific niches with a chance for amazing growth.
I’ve been very impressed with two sub-sectors that best represent my favorite stock pick these days, Qualcomm (NASDAQ:QCOM). Of course, Mobile Telecom is hot and is up over 11% YTD while Semiconductors is up almost 5% YTD.
Qualcomm is a fantastic company, the leaders in CDMA technology that powers most of the 3G devices that consumers can’t get enough of these days - Mobile Internet connectivity to laptop PCs, consumer electronics and hand-held computing devices. As the global community becomes more mobile, Qualcomm is at the forefront to benefit from the demand.
Qualcomm operates in four segments - Qualcomm Code Division Multiple Access Technologies (QCT) which develops and supplies CDMA-based integrated circuits and system software for wireless voice and data communications and multimedia functions. Qualcomm Technology Licensing (QTL) that grants licenses to use portions of its intellectual property portfolio comprising patent rights useful in the manufacture and sale of certain wireless products and their derivatives. Qualcomm Wireless and Internet (QWI) segment comprises Qualcomm Internet Services that provides content enablement services for the wireless industry ; Qualcomm Government Technologies which offers development, hardware and analytical services involving wireless communications technologies; Qualcomm Enterprise Services that provides satellite and terrestrial-based two-way data messaging, position reporting, wireless application services and managed data services; and Firethorn which builds and manages software applications that enable financial institutions and wireless operators to offer mobile commerce services. Lastly, Qualcomm Strategic Initiatives (QSI) that makes strategic investments to promote the worldwide adoption of CDMA-based products and services.
Qualcomm runs with some big names such as Broadcom Corp (BRCM), Nokia (NYSE:NOK) and Texas Instruments (NYSE:TXN). All large cap companies, but Qualcomm is at the top of the charts at $71 billion market cap. Their Price to Sales ratio is 6.73x while the industry average is only 3.27x. They reported Q1 EPS up 4% from Q4 2009, but remarkably were up 150% year over year. That shows the direction this company is going and that they will continue to gain market share and stay on top as long as their fundamental drivers remain strong.
So far, Qualcomm has had a good run up to $42.30. The stock is up 19% from it’s March 1st low of $35.56. I see an upward trend that isn’t ready to pull back. Some analysts changed their estimates, deciding early this year that Qualcomm was a Hold, that it had seen it’s high in early January. That was the pullback before the great gains we are going to see over the next couple of years. Deutsche Bank raised their target to $54 from $52 saying they think Qualcomm could see a meaningful share gain in 2012 on the basis of several important, recent design wins. I agree with them.
The company has an awesome team at the top leading them ahead of their competitors and one step ahead of the technology demand. As long as they continue to share the company’s single, driving passion: to deliver the world’s most innovative wireless solutions, they will continue to outperform in their sector.
Disclosure: Long QCOM