The Three Mobile Plays I’m Watching
Matthew is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
I am continuing to add exciting growth stocks to the watch list of my paper trading portfolio that I call the “No Drip, No Mess” Portfolio. Today I am adding three companies that are each involved in different aspects of the mobile industry. I recently added one company from my watch list to the portfolio in a trade that was accomplished using none of the original capital, as the investment was paid for by income generated by the portfolio. We’ll look to do that again with one of these exciting players positioned to profit from the mobile industry.
American Tower (NYSE: AMT) is a very interesting company for a number of reasons. While their name says what they do, it no longer tells the whole story. They own nearly 50,000 telecommunication towers and related real estate, though only half of them are in the US -- they now either own or have joint ventures in India, Mexico, Brazil, Chile, Columbia, Peru, South Africa and Ghana. What also makes them interesting is that they converted to a Real Estate Investment Trust at the beginning of the year. I’ll be watching their ability to continue to grow now that they are a REIT and must pay out 90% of their net income to shareholders. They have a lot of debt on the balance sheet so without retained earnings their growth might come at the cost of diluting shareholders. However, their global growth prospects are very enticing.
Motion sensor designer InvenSense (NYSE: INVN) got its start by getting its micro-electro-mechanical systems (MEMS) in Wii controllers. They are now getting their motion-control technology into smartphones and tablets, which open up a much larger opportunity. While they currently supply most of the major handset makers, the big name still missing from their client roster is Apple (NASDAQ: AAPL), which is supplied similar chips by STMicroelectronics (NYSE: STM). There are two key growth drivers that I am watching: their ability to gain share in selling to Chinese handset makers and their ability to crack into Apple’s supplier base. Shares more than doubled from their IPO price last year but have given up most of those gains recently, making them very compelling at today’s level.
Another company that is doing well in mobile but still not an Apple supplier is NXP Semiconductors (NASDAQ: NXPI). As a leader in near-field communication technology, which allows communication over a very short distance, NXP stands at the precipice of what could be the next big thing. Through both the Google (NASDAQ: GOOG) Wallet and their Android platform this technology has the ability to allow consumers to skip the task of taking out their wallet and swiping the plastic -- they can pay via their smart phone.
While not mainstream, the potential is there for this technology to really take off. There are a couple of other concerns that I am watching as, like STMicroelectronics, NXP Semiconductors is a Europe-based company and as Europe’s troubles continue, a collapse of the currency or severe recession on the continent would really hurt their prospects. I’ll also be watching their balance sheet, which is loaded with $3.8 billion in debt; however the potential is there to really be a game changer.
There is a lot to like about the potential of the mobile industry and all three of these companies play interesting roles in its development. As a REIT, American Tower will be the most stable company and as the largest of the three more of their growth is behind them. With a near debt free balance sheet and over 10% of its market cap in cash, InvenSense has the breathing room and financial flexibility not found in NXP if the global economy takes a turn for the worse. This is an exciting industry and I’m excited to one day add one or more of these companies to the “No Drip, No Mess” Portfolio.
latimerburned owns shares of American Tower, Apple, and InvenSense and has the following options: Bull Call Spread on Apple. The Motley Fool owns shares of Apple, Google, and InvenSense. Motley Fool newsletter services recommend American Tower , Apple, Google, and NXP Semiconductors . Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. If you have questions about this post or the Fool’s blog network, click here for information.