We’re breaking things up a little bit today for the Friday File — this piece is about some investments that interest me personally, and I’ve also got a teaser solution piece for the Irregulars today that you can see here.
The investments that are most appealing to me right now are both in the technology space, and they’re both stocks I’ve written about before that are pretty easy to justify as core long-term holdings.
First is Qualcomm (QCOM), for reasons I’ve mentioned in more detail in the past — Qualcomm is a big blue chip company in the wireless chip space, with potential growth as the world becomes more interconnected (despite the fact that QCOM may have less market power in new wireless standards than they did in the last couple generations). The big catalyst for them is their pending acquisition of NXP Semiconductor (NXPI), which I own and suggested to the Irregulars over the Summer.
I’ve been watching and waiting to make sure there isn’t a stronger bidder for NXPI — that was always unlikely, given NXP’s size, but anything is possible… and I’ve seen nary a whisper about a competing bid or any real revolt that would force a higher buyout price than the $110 agreed to, so I think we’re dealing with probably a 10% return from holding NXPI over the next year. That’s not terrible, and it’s much more “guaranteed” than most potential stock returns, since Qualcomm is not likely to pull out if the market happens to drop by 10% or more next year and it’s an all-cash deal (though it is NOT, to be clear, really guaranteed — the deal still needs approval from both sets of shareholders and lots of international regulators). That 10% yield to close is high for an acquisition that doesn’t seem to me to have significant regulatory issues, but there could be concerns that I’m unaware of… so it’s hard to sell NXPI when you know you’re very likely to earn 10% over the next year by holding. I know, I know, 10% is not the stuff dreams are made of… but it ain’t bad.
So I have not yet sold my NXPI shares, but I do expect that Qualcomm will be a very strong bet over the next two years as they integrate the acquisition — not only because it creates a stronger company in security, automotive, ...