Earlier this year I explained how to profit from the growing world of smartphone and tablet devices by using the mobile trinity strategy I didn’t have enough money at the time to complete the trinity and only had 2 out of 3 parts. Well I finally saved enough and earlier this week I bought 30 shares of Qualcomm Inc.
Qualcomm designs and manufactures chipsets and other technologies that go into mobile gadgets. With a market capitalization of ~$125 billion, it’s worth more than ARM, NVIDIA, and AMD combined. Qualcomm is about the size of Intel Corporation, which I also own shares in :) The reason QCOM is so successful is because its technology is pretty much ubiquitous in all our cell phones. Its entire business is getting the licensing fees (like royalties) on pretty much every smart phone we use.
“We believe Qualcomm will pick up significant smartphone share on multiple platforms into 2Q/June. There have been numerous reports that Qualcomm could supply up to 70 percent of the Galaxy S4s, supplying to both US and European S4 models versus only US on the prior S3 platform.” ~Rakesh in a statement to ZDNet in April 2013
Last week Apple announced that it has just partnered with China Mobile to bring the iPhone to the carrier’s 4G and 3G networks starting in January 17, 2014. This is a huge deal T-Mobile, Verizon, and AT&T only have about 100 million to 130 million total subscribers each. But China Mobile, the largest mobile network operator in the world, has about 750 million subscribers! So even a small percentage of that market could be very lucrative for Apple
Although iPhones use one of Apple’s own chipsets, they still use Qualcomm’s RF transceiver, baseband processor, and power management chips. So this new agreement Apple made is good for QCOM shareholders too There is also speculation that Apple may use more of QCOM’s technology in future generations of their more affordable devices like the iPhone 5c, which is meant to target the medium price range of the smart phone market. This is because QCOM’s chips have the ability to integrate Bluetooth and Wi-Fi directly into the main chip which would save Apple money.
“Smart phone growth is projected to be 16% annually through the end of the decade. (Qualcomm’s) LTE chip has about 97% market share, so they are in good shape. Have gone from being the 8th or 9th chipset producer a few years ago and are now number 3. It tends not to get the credit that it should. Trading at about 15X next years earnings. Its growth is not only fairly robust, but is quite predictable.” ~Gordon Reid , GoodReid Investment Counsel
QCOM allows us to invest in the growing cell phone market (mostly driven by Asia) without actually having to pick a leader Pretty good deal I think Now that my trinity is complete, I can just sit back and enjoy my profits as all 3 companies have incredible cash flow. How do you plan to take advantage of the fast growing mobile market in the future?
I also bought 40 Comcast shares on the same day I bought QCOM. Both were purchased in my RRSP. Comcast Corporation (CMCSK/CMCSA) is the largest mass media and communications company in the world by revenue. It owns NBC, Universal Studios Inc, and also provides cable and internet to tens of millions of Americans. It’s Comcastic Investing is so much fun because you get to learn how all sorts of businesses operate