Recent Buy – QUALCOMM Incorporated $QCOM

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From yahoo:

QUALCOMM Incorporated designs, develops, manufactures, and markets digital communication products worldwide. It operates through three segments: Qualcomm CDMA Technologies (QCT); Qualcomm Technology Licensing (QTL); and Qualcomm Strategic Initiatives (QSI). The QCT segment develops and supplies integrated circuits and system software based on code division multiple access (CDMA), orthogonal frequency division multiple access, and other technologies for use in wireless voice and data communications, networking, application processing, multimedia, and global positioning system products. The QTL segment grants licenses or provides rights to use portions of its intellectual property portfolio, which include various patent rights useful in the manufacture and sale of wireless products comprising products implementing CDMA2000, wideband CDMA, CDMA time division duplex, and/or long term evolution standards and their derivatives.

In short: pretty much every single iphone, samsung, and chinese made smartphones are using QCOM wireless chips, and QCOM makes money through royalty program.

 

QCOM was flying high at $81 in 2014, then Apple stops paying the royalty fee. Since then, the stock yoyo back between $40 – $70s, the company makes headlines with suing apple fail attempt at buying NXP, fencing/fending off from being bought out by a Chinese company, that sort of things.

Why buy $QCOM at this level of $50.xx?

#1 The lawsuit with Apple seems to settle, Apple and other companies resumed paying the royalty fee

#2 It’s still the leading company that’s reached/achieved the 5G technology for the broad market. If 5G is achieve, the current gaming console are going mobile, baby!

#3 I like the 5% yields right now. 🙂

#4 … I don’t have the #4 🙂

 

Risks:

#1 Apple could mess that settlement again and refuse paying

#2 Slow adapting of 5G station from US company like $VZ, $T, $TMUS

#3 Slow growing on cellphone subscribers, buyers. As the battery technology improves, cellphone’s life lasts longer and longer. I remember smartphone replacement was 1 year. Now people upgrade every 3-4 years, some even 5 years. my iphone 6s is “ancient” 7, 7s, 8, 8s, 10. That’s 4 gens, there are people that take better care of their phone than I do, and they’re still using iphone 4s or 5. I talk about iphone, but samsung S series are the same, they do last a long time now.

#4 Everybody is talking about the US-China trade relation is going to have ripple effects, and tech companies will get hit hard $QCOM is definitely vulnerable.

 

I bought 10 shares at $50.xx, yielding at 5%, that would give me $24.8/year. The stocks would have to go down to $48/share in order for me to lose any money. Otherwise, I’m going to sit on this and collect my royalty from sub-sequences Samsung phone, iphone, and other smart phones (Sony, Nexus, Google, etc). Anyhow, it’s quite good to own a business where you can sit back relax and collect royalty. LOL 🙂

 

3 Comments

  1. Thank you for your analysis. I haven’t been looking at Qualcomm myself. However, it was interesting to read which risks an investor should keep in mind before investing in the company at the moment.

    – David

  2. Good buy. I haven’t looked into semiconductors much. I do know that QCOM seems to be a leader in their space so it is always great to own a leader. Thanks for sharing.

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