Investing Inside 2017 Recap
When we came up with the “Investing Inside” series it was an attempt to solve two problems we were having. The first was we we’re analyzing companies that ended up not making our investment grade list. These we’re all good well known companies, money making companies, but they just didn’t make the grade at the time of our review. The other issue was the novice investors that we were speaking to had reservations about paying $150, $200, $1000 for a share of stock. They wanted investments that were just as good but a lot cheaper.
So we started thinking about angles to get invested in companies like Amazon, Google, Apple, Samsung, or Nintendo without buying Amazon, Google, Apple, Samsung, or Nintendo. We found online companies that did break downs of popular consumer electronics, and we used those break downs to find the companies providing the chips, components, displays, etcetera with the hope that this would lead to investment opportunities.
To close out the year we want to take a look at the Investing Inside results. From every Investing Inside report we gathered a little more insight into which companies are the real deal with an optimistic future, and which companies were just getting by.
Below we tallied the number of components/ devices each manufacture has inside the electronics we covered. We also did analysis on several of the companies listed and below we will give a summary of our review.
So What Did We Learn From Our Investing Inside Series?
We learned Broadcom (AVGO) is a growth company. Broadcom reported $2 billion in revenue in 2012 and $13 billion in revenue in 2016. The company had an issue controlling cost in 2016, reporting a $1.7 billion loss that year, but has bounced back in 2017 with $1.8 billion in net income.
Intel (INTC) seems to have gotten its groove back. Over the past several years there have been many opinions on what Intel has gotten wrong. Like how they were late in diversifying from desktops and laptops and how they didn't make a big enough impact in the mobile or gaming market. Intel grew revenue over 7% from 2015 to 2016. The stock opened 2017 at $36.61 and closed on December 15, 2017 at $44.56, a 21.7% increase.
There isn't much we can tell you about Samsung that you may not already know. They are in the consumer electronics business, providing, televisions, cell phones, laptops, and also washer, dryers, and a bunch of other products. But besides that Samsung makes money on the components they provide to Apple, Google, and Nintendo. There has been a lot written about the OLED screen Samsung provides to Apple for the iPhone X. Samsung has over 90% marketshare of the global OLED market.
Looking into Skyworks Solutions (SWKS) we saw increasing revenue from 2013 to 2017, increasing net income from 2013 to 2017, and increasing free cash flow from 2015 to 2017. The stock has pulled back from its $116 high and is now trading in the $90 range, Skyworks Solutions may be worth a look and an investment in 2018.
What we learned about STMicroelectronics (STM) is that it's a company with declining revenue and expanding capital expenditures. With that stated, STM has been profitable even with the declining revenue.
In our review of Texas Instruments (TXN) we learned TXN is a good company with a good cash reserve, great return on equity and return on assets, and the company continues to increase its dividend while repurchasing shares.
NXP Semiconductors (NXPI) is the go to for NFC chips. NFC chips provide the technology for wireless payments. We found NXP devices in Apple products, Google products, Samsung products, and Nike products. It makes sense that Qualcomm wants to merge with NXP Semiconductors.
With Qualcomm (QCOM) we saw declining revenue, declining net income, and declining free cash flow and yet it still graded out as a 'C' in our investment model. As we were taking an even deeper look into the company and figuring out a safe purchase price, Broadcom made a bid for Qualcomm. We are still considering a QCOM investment.
There is our look at a few of the companies that have shown up in the Investing Inside series. Also, many of these companies are making waves in the auto industry. Semiconductors are helping automakers innovate like never before, so that is something to keep in mind.
Before you hit the buy button on any of these companies make sure to do your own research.
We look forward to looking under the hood of more consumer electronics in 2018. If you want to find out more and stay up to date with the Investing Inside series, be sure to leave your email at sevillereport.com.
Thanks, and may your next investment be your best investment.