Qualcomm (QCOM)

(A Past Pick Nov 13/13. Up 14%.) They control the LTE chip market with a 97% control right. This is a play on smart phones, mobility and chips that go into mobility. Trading at about 15X earnings. The downside is that they are very heavily in the China market.

They are well-positioned in the handset space because they supply all the chips. In China the growth market for smart phones is relatively under penetrated and they are being investigated by the regulatory authorities there for being so dominant. Having difficulty in collecting royalties from Chinese manufacturers. This is kind of a question mark on how this might affect their future growth. Also, hand set prices have been declining. She is not interested in buying this.

Strong revenue growth, almost no debt and solid return on equity. A nice way to play the smart phone space, because they supply the chipsets and have a royalty stream. China represents about half their revenue, and they are having difficulty collecting their royalty streams. There is no visibility and no synergy as to when they are going to be able to do this. This is why the stock is down. You are seeing decelerating growth rates going forward.

Has been dominant in the CDMA space, so they continue to have their position. Challenges include China not paying the royalty that is due and the Chinese government being on a campaign against all major foreign companies. That will linger for a while. The other challenge is that while smart phones have been a great growth engine, this has started slowing down. They are trying to broaden the use of chips into other things and this will be a challenge for a longer term. If you had good profit, you might want to take it, at least until there is more clarity on the Chinese situation.

He is concerned about their situation in China, which involves some providers not honouring the licensee agreement and paying the royalties. This of course is their bread-and-butter. He has looked at other similar situations with this company, and it seems there have always been negotiated resolutions. The real risk is if it becomes more of a trend than a one off. He is watching this very carefully.

(Top Pick Aug 19/13, Up 15.20%) Huge royalty interest. Have 90% margins in some of their core businesses. He would continue to hold it. It appears that smart phones have matured. We are seeing a bit of maturation in the market. But Apple is showing that you still show good demand in the market. Cars are another growth area for them, although Blackberry is more likely to exploit that.

He is still a big believer in this company. They were having some trouble getting their royalties out of China. He would probably start to step into this company. The name has corrected just right.

Earnings were really quite good, but the China news knocked it off. The stock really pulled back, so he added at these prices. This is one of those stocks that has got the growth, the technology, in the right place and you can’t run the devices without the chips. Dividend yield of 2.3%.

The company sells royalties for its 3G and 4G chips. The 5G is coming out soon. There is a big demand, big demand from Asia. What is happening is that they are not paying for these licenses, so they are in a protracted fight. Chinese have accused them of being a monopoly. It’s tough doing business in China. In the meantime it is a fantastic company, and the thesis is not going away any time soon. Smart phones are going to need upgrading and this company will get licensing revenue over time. Balance sheet is terrific and they are buying back stock. Dividend is going higher. This is a wonderful entry point. 2.3% dividend yield.

Are having trouble collecting royalties from Asian customers. But he likes it. Prefers others. Probably a short term blip, but it took a hit today. Watch it over the next couple of days to see if it swings around.

There are concerns about trouble collecting Chinese royalties as well as a large antitrust settlement in China. This is not new news, but the gravity of the news is the story. Rather than dealing with one or 2 groups in China resisting paying licensing fees, it is becoming a wider spread problem. This is a concern to him, and he is looking at it very carefully. This company lives on its royalties.

Trading at 16X forward earnings. Pays a 2.1% dividend. Smart phones are their sweet spot, which is where the growth is on the chip side. You can see 10% EPS and Top Line Growth over the next 3-4 years. Have a real roadmap of their technology. Great management.

Model price is $101.28, a 26% upside. What is there not to like about them making the chips in all the cell phones.

Likes the royalty play on 4G, and as China continues to upgrade to 4G, this company has most of the chips and will benefit. Very smart operators. 2.1% dividend yield. Thinks you could slap on a 15X multiple on earnings, which will give you $75 a share plus their cash of about $20 a share.

(Top Pick May 16/13, Up 23%) This is the parts maker for the smart phone industry. They will do well. Continuing from 2-3-4 G in the emerging markets. Not an expensive stock.