A major semiconductor chipmaker has been struggling lately, with its stock down more than 20 percent over the past year. The company is Qualcomm (Nasdaq: QCOM), and if you can stomach some risk, it’s priced attractively.
Qualcomm generates revenue (more than $25 billion annually) from the sale of chips and from licensing fees. (It licenses its CDMA technologies and earns 3 to 5 percent of the wholesale price of every 3G/4G smartphone shipped worldwide.) The company’s recent Snapdragon 810 chip was bypassed by Samsung in various mobile devices, dealing a blow, and licensing fees have been soft largely due to problems collecting its due in China. Indeed, in its latest quarter, revenue shrank by 18 percent.
It has fixes in the works, though. Its new Snapdragon 820 chip is reportedly 50 percent more powerful than some key rival offerings and is expected to be in some upcoming smartphones. Meanwhile, licensing agreements are being hammered out with major mobile device makers in China.
Patient believers in Qualcomm’s future can collect a dividend yield recently near 3.7 percent while they wait for the company’s performance to improve. That dividend payout has been increased annually over the past 12 years. Qualcomm is not a slam-dunk investment, but its upside potential seems to outweigh its downside risks. (The Motley Fool owns and has recommended shares of Qualcomm.)
Ask the Fool
Q: Within my IRA, can I move my money around between different stocks and mutual funds? - L.W., St. Joseph, Michigan
A: If you opened an IRA at a brokerage, you should be able to move your assets between various funds and stocks. You won’t be taxed on any gains when you do so, but you’ll likely pay trading commissions.
If your IRA is with a mutual fund family, you can probably switch between its own funds at little or no cost, but you might not be permitted to invest in individual stocks at all. (You can always transfer your IRA to a brokerage. Learn more about brokerages at broker.fool.com.)
Q: What’s the S&P 500? - P.C., Victoria, Texas
A: Launched in 1957, it’s an index of 500 of America’s biggest companies, selected by financial services company Standard & Poor’s and updated regularly. Though the U.S. stock market encompasses thousands of companies, these 500 together make up about 80 percent of the market’s total value.
More than half of the companies sport market capitalizations topping $17 billion. The index includes names such as 3M, AT&T, Alcoa, Allstate, Amazon.com, Apple, AutoZone, CVS Health, Campbell Soup, Caterpillar, Chipotle Mexican Grill, Clorox, Coach, Costco, Delta Air Lines, Estee Lauder, Expedia, Facebook, FedEx, Gap, Garmin, Harley-Davidson, Hershey, Kellogg, Kohl’s, Kroger, Marriott, Mattel, Molson Coors, Netflix, Nordstrom, Oracle, PepsiCo, Pfizer, Priceline, Ralph Lauren, Sherwin-Williams, Sysco, Target, Texas Instruments, Tiffany, Under Armour, UnitedHealth, Viacom, Visa, Western Union, Whirlpool, Whole Foods Market and Xerox.
You can invest in the S&P 500 easily via an index fund such as the low-cost Vanguard 500 Index (VFINX) or the SPDR S&P 500 ETF (SPY). Learn more about index funds at fool.com/mutualfunds/mutualfunds.htm.
My dumbest investment
As a new stock investor, I watched Netflix climb to more than $300 per share in 2011. Then I watched it begin to fall. I bought some shares at around $125 apiece. The next week, Netflix announced the decoupling of its video streaming and DVDs-by-mail services, and the stock plummeted further.
Over the next few months, I watched my investment plunge in value, and I read articles about how CEO Reed Hastings had hurt the company with his moves. Finally, after tiring of seeing it fall and having all that red lettering on my scorecard, I sold at around $60 per share. Given where the stock is now, I should have had more patience! - Bob, online
The Fool responds: You did lose out on quite a gain. Netflix shares fell to $60 and below in 2012, only to recover to more than $700 per share in mid-2015, before the company executed a 7-for-1 stock split. Had you hung on, you would have increased the value of your investment sixfold.
Netflix has not been a good stock for those averse to volatility, but the company, still led by Hastings, has been performing well. Its last earnings report showed the company having grown to more than 69 million members worldwide, with the company expanding into Japan, Spain, Italy and Portugal. Netflix has had great success with its original programming and has been able to hike its prices, too.
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