I’ve spent a lot of time pouring over the 77 different stocks that people requested me to analyze. I’m almost done writing the analysis out for each stock for the upcoming “Stocks Requested for 2016: Cody Willard analyzes your stock picks” ebook that I’ll share with you Trading With Cody subscribers. Out of all those stocks people asked me to look at, I found only a couple new names that looked good enough to dig into further. I’m doing that presently and am likely to pull the trigger and send out a Trade Alert on at least one of them in the next few days.
I was asked about 77 stocks for this new eBook but interestingly, nobody asked me about the new stock I’m putting into the portfolio today, Qualcomm, which has been obliterated over the last few years as we’ve steered clear of it. The company’s chips used to dominate the smartphone market and the flip phone market long before that, but have recently been squeezed by others getting into the market. I’d cautioned many times over the past few years to let this one get cheap enough before trying to buy it and I think we’re just about here.
Qualcomm’s currently trading at $48 per share which is less than 10x this year’s earnings estimates of nearly $5 a share.
Just as important is the very strong balance sheet which is what makes me want to go ahead and start scaling into this stock today. Qualcomm has about $30 billion in cash and liquid investments offset by about $9 billion in debt. The market cap is only $70 billion right now, which looks rather small when you consider that $20 billion+ in net cash on the balance sheet makes up nearly 1/3 of that market cap.
The company generates $5 billion per share in cash right now, which is down from the more than $8 billion in cash it used to generate a couple years ago. It looks like sales have finally stabilized and I expect the company to actually grow sales 5% or so this year.
Qualcomm is just starting to supply into the smart/connected car business which could give the revenue estimates some nice upside potential in coming years.
Finally, the stock pays near 4% dividend which is about 3-4x better than you can get on a CD these days.
I’m starting off with a 1/3-sized tranche of common stock in QCOM today and will look to build it up over the next few days and weeks to a full middle-sized position in my portfolio.