Cellular Baseband Providers to Benefit from Shift to 4G
2012-02-03 12:50:21
Cellular baseband providers in the telecommunications sector are expected to benefit from the shift to 4G technology in wireless devices as capacity expansions are being pursued to achieve growth to keep up with global demand, says Craig Berger, a Managing Director at FBR Capital Markets Corp."We are seeing the world slowly convert over to smartphones, and at some point almost every phone will be a smartphone. As this happens, the bits and bytes of data required is going to increase meaningfully. Therefore, network capacity also needs to increase meaningfully. We have already seen this with the iPhone effect," he said.
Berger likes Broadcom Corporation (BRCM), a cellular baseband provider. He says the stock seems to have stabilized over the past month, and he believes the company's fundamentals are set to improve in the middle of the year. Berger also says the stock is widely disliked among investors, so it is a good time to buy.
"There are fears that they could lose the Wi-Fi Bluetooth connectivity socket in the iPhone or iPad this year. I do not believe that will happen, but that is the concern out in the market," Berger said. "There are fears that Qualcomm's next-generation basebands, which integrate Wi-Fi, will take away some of Broadcom's significant Wi-Fi or combo chip revenues."
Diversification & Limited Risk Benefit Investment Porfolios
2012-01-31 13:42:57
Keeping a well-diversified portfolio and understanding levels of risk tolerance are key to accomplishing investment goals and objectives over the long term, says Don Reilly, Chief Executive Officer and Co-Founder of Reilly Financial Advisors."You have to stay diversified, and you have to keep that discipline to stay diversified, even if you've got one stock in there that's really hot, you can't be tempted to switch more money into that, simply because then you're going beyond the risk that you originally wanted or need," he said.
Reilly says his firm's portfolio is approximately 20% in large growth, 20% in large value, about 10% in the small cap and 10% in medium, with international at about 15%, and cash roughly at 3% or 4%. He says the portfolio is broken down by asset class, and then within each class he has eight to 10 stocks of individual companies.
"We'll never have more than approximately 2% to 2.5% of the portfolio in any one stock, ever. If it goes up a lot and gets way above that, we'll cut back on it. That way you have a well-diversified portfolio; you have limited risk with each company that you own, and you will benefit," Reilly said.
Size of Bankruptcy Key to Investing in Distressed Companies
2012-01-30 12:57:02
With limited opportunities for investing in distressed companies right now, the size and phase of a bankruptcy are key factors for possible investments as part of a credit portfolio, says Nancy Havens, Founder of Havens Advisors, and Richard Goldstein, Managing Director at the firm."We try and do full-out bankruptcies. And on the bankruptcy side, there are not that many bankruptcies to do right now. We're interested right now in the size of the bankruptcies," Ms. Havens said. "In credit, we are in a bunch of bankruptcies and strict event situations as well as high-yield situations that are also event related."
Ms. Havens gives AMR Corporation (AAMRQ.PK), parent company of American Airlines, as an example of an investment opportunity for her firm. She said her firm has been known to short securities of companies that it believes will go into bankruptcy and/or are going to have a fairly substantial hill to climb in the future.
"We were blessed with a new one, recently American Airlines, which was a very nice big one," she said. "We expect the bankruptcy business to continue, and do prefer, generally, and have larger positions in these specific situations in general."
Cost Variabilization Boosts Equipment Rental, Leasing Demand
2012-01-27 12:51:09
Large contractors and firms in the construction space have reported revenue growth rates despite the weakened market for construction in the U.S. as their cost structure variabilization increases toward more rental and leasing of heavy equipment, says David Wells, a Senior Equity Analyst at Thompson Research Group."There's going to be a lot of business that's going to go to the rental channel because they've seen the services they can provide, the reliability and the fact that you don't have to pay interest, you don't have to pay taxes, you don't have to maintain the asset," he said.
Wells has a "buy" rating on United Rentals (URI) due to the company's ability to buy heavy equipment, and rent it out to clients quickly. He says this activity by URI is another example of the level of demand in the marketplace right now.
"The interesting thing is if you look at the capex that they've done, United is expecting a gross capex figure of $775 million in 2011, pretty high level of capex. They've actually grown their overall fleet size, but they're still able to rent out that equipment at very high rates of utilization," Wells said. "In the last quarter, they reported utilization of 73.5% and low to mid 70s is kind of the theoretical max there."
Wireless Usage Growth Leads to Competition for Spectrum
2012-01-26 12:42:23
The increase in data demand and the limited spectrum availability are shifting competitive dynamics in the wireless communications space, leading carriers to engage in a mix of capex, partnerships and M&A activity to satisfy the seemingly unquenchable thirst for faster data transfers by smartphone users, says Jonathan Chaplin, Senior Analyst at Credit Suisse."You've basically got a land grab for spectrum going on right now, and there is very limited supply, and it has interesting implications for a couple of companies," he said. "There are two options, either moderate usage or demand or increase prices. Right now, we don't see a big demand moderation. Either the quality of service on wireless networks is going to go down or pricing is going to go up."
Chaplin likes Clearwire Corporation (CLWR) in the near term although the company had a difficult time in 2011 from a stock performance perspective. He says Clearwire is the one company in the wireless communications space with massive amounts of unused spectrum, and he believes the company's spectrum is going to increase in value significantly as data demand increases.
"In the case of Clearwire, we think with the breakdown of the AT&T/T-Mobile merger, there's going to be a big increase in demand for their spectrum. AT&T is going to need more spectrum. T-Mobile is going to need more spectrum. Leap and MetroPCS, who had planned to buy spectrum, need more spectrum," Chaplin said.