Qualcomm (QCOM)

This is going through a hard time right now. He has a model price of $54.90, but thinks the stock will continue to move lower. It will eventually get straightened out and he will look to buy it at lower levels. The yield is almost 5%. He would add length near $40.

They're in a tussle with Apple over licensing and face problems with their intellectural property hijacked in China. Thet're the leader in LTE chips with a 95% market share. Great, but they can't gain much more. He sold his shares in spring 2016 based on China fears. There's so much choice among tech stocks, so Qualcomm wouldn't make the grade--though it's a good company.

A little risky, but they own the commnication chips market. With the global 5G roll-out, they are better positioned than anybody. There's potential growth. 15x foward earnings. 4.5% dividend yield. (Analysts' price target $70.23)

One of the largest semiconductor makers in the world and its specialty is communications semiconductors for cell phones. It was trading very cheap when they bought it in the fall. Good long-term outlook with the advent of 5G. trading at 9 times next years earnings. Dividend yield of 4.1% (Analysts’ price target is $72.38)

It is in the right space. Not the cheapest in the group but not the most expensive. They get royalties on their patents. Broadcom has an offer on the table and maybe it comes together. China has given them no royalty payments to date. You might get some this year. There could be a takeout. There is a short fuse on all these possible events. It will go north of $80 a share if it goes. (Analysts’ target: $72.12).

He thinks the Broadcom (AVGO-O) deal will happen. The lower risk way to bet on the acquisition is to buy Broadcom. He likes Broadcom and if the acquisition doesn’t go through, you will be better off with Broadcom than with QualComm.

One of the leader in technology chips for cell phone and other technologies. Has had some weakness in term of performance in the last few years. He think this is still up to be acquired by Broadcom (AVGO-O) which he likes. If he was going to buy this, he would say there is some risk because the returns have slipped a little bit. But because of the potential Broadcom acquisition you could play this and get a little bit of a premium, and get some cash or become a Broadcom shareholder.

Broadcom is trying to acquire this. It’s trading at a discount. Financial performance has been very spotty, especially in Cdn$. There is an assumption that if the acquisition goes through, there would substantially be more upside. The market is telling you that a higher price is needed for the stock, but there is a lot of liability on the story. There is way too much hair on this.

The company has resisted the recent takeover offer. They make chipsets for mobile devices, and the government of China refused to enforce their patent rights on devices in China, which put a huge hole in their income statement. It’s an unresolved issue. He doesn’t know what is going to happen.

The big issue is the litigation story. He believes they are going to court with Apple (AAPL-Q). This involves 6 patents and one company on one side with a huge balance sheet ready to go to war, trying to cut the profitability on a company that they believe have anti-business practices. This is one you just want to stand on the side and wait to see what happens.

They have legal problems and fights with the street. You need to move on. He would focus on others.

(Market Call Minute.) Sold his holdings in 2015 at about $70. Didn’t like what was happening in China. This has also spilled over into North America, where Apple (AAPL-Q) is pushing back on Qualcomm about paying royalty and licensing fees. He wouldn’t go near this.

With all the patent disputes going on, including Apple (AAPL-Q) and all the countries that are not paying their royalty fees, there is not a lot of visibility in terms of how it is going to play out. A very volatile stock, so she would not step in here.

Thought this would do well because of the main chip in the smart phones, but it never materialized. The CEO just quit. The balance sheet is great and they have great technology, but clearly they missed the boat.

QCOM-Q vs. AVGO-Q. Broadcom is getting closer to closing their deal. They have great price momentum, although valuation is catching up. QCOM-Q has poor price momentum and poor valuation.