NXP Semiconductors (NXPI)

When an offer to be bought out by Qualcomm fell through he saw that as a good time to buy. Now that the stock has recovered back towards $100, a level lower than they would have been acquired at, he is interested again as it is a better company today than before the takeout talks. They are involved in semi-conductor parts for autos and factory communications. Lots of upside to come. Yield 1.02% (Analysts’ price target is $115.40)

He's known them for a decade. He's not excited about the semi space NOW and this is not his favourite name here. He's slightly negative about it.

QUALCOMM (QCOM-Q) is supposed to acquire this on September 22. Hold or Sell? When you get an acquisition offer, there is a relative spread that occurs, and as soon as the announcement occurs, it tightens, but there is always a little bit left over. You can take an arbitrage trade, and if you put some leverage on it, you may be able to juice your return and take the differential between the Buy and the merge price, and perhaps get 10% in a very short period of time. The underlying risk would be if the merger didn’t get approved. There are going to be a few gates they have to go through before this is approved, so tying up your money would not make a ton of sense. If you can Sell into it, just do that.

We are seeing a transformation in the semiconductor business. These sleepy semiconductor businesses that used to grow at around global GDP are now growing at a much quicker rate because there are more and more semiconductors being used in everyday consumer devices, including cars. Longer-term, as vehicles become a little more sophisticated, the fundamentals support owning companies like this provided the valuation is reasonable. He prefers Infineon (German) where he thinks there is going to be more upside.

He does not think the deal is going to happen. The market is skeptical as well. He would continue to hold and see what happens.

There is a $110 cash offer. The $98 stock price probably correctly reflects the risks. He does not have more to add. When there is an M&A deal, the charts don’t matter at all.

(A Top Pick March 10/15. Down 18.94%.) Got stopped out in July and sold his holdings at $96. Semiconductors are a pretty good sized piece of his portfolio today, as technology is making a nice turn.

(Top Pick Mar 10/15, Down 30.37%) He came out of it. Semiconductors can be quite volatile.