A Few Apple Derivative Plays to Drive Your Portfolio
Harsh is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
If you are someone who has put your money on Apple (NASDAQ: AAPL) and its derivative plays, 2012 must have been a good year for you so far. And why not! The latest iPad moved more than 3 million units in the first four days and might go on to sell around 14 million units this quarter if analysts at J.P. Morgan are to be believed. In addition, the analysts also expect iPhone sales to hover around 30 million units. Moreover, Fool analyst Eric Bleeker has already told us why Apple can record another blowout quarter this time and I firmly second his opinion.
Thus with everything going hunky-dory at Cupertino, I think it would be a good time to take a look at a few companies who depend on Apple’s world-class products for driving their top lines.
- Cirrus Logic (NASDAQ: CRUS) - This supplier, which provides Apple with audio codecs, has had a terrific year so far with its stock gaining a stupendous 47%. Cirrus’ relationship with Apple goes a long way back and it featured in the latest iPad as well, which doesn’t come as a surprise considering it was in the earlier two as well. The company has consistently been inside the iPhone as well since landing that spot for the first time in the iPhone 3GS. Since the time the 3GS was launched in June 2009, Cirrus’ stock has made investors richer an amazing 406% (yes, that’s not a misprint). Moreover, Eric counts Cirrus amongst the top 25 tech stocks and stresses upon the relationship which this component supplier has with Cupertino. The fact that Cirrus gets 70% of its revenue out of Apple might be a risk but the upside which it offers seems tremendous. Apple has used Cirrus for audio codecs for a long time and we might see the trend continue as I don’t see any reason for Apple to drop this supplier at the moment.
- OmniVision Technologies (NASDAQ: OVTI) – After a torrid time last year, which saw OmniVision lose its image sensor spot in the iPhone 4S to Sony, 2012 has been kind to the company with its stock gaining a whopping 64%. I recently wrote that OmniVision might be gaining its clout at Cupertino back and its presence inside the next iPhone would give me more reasons to be bullish. However, the company looks to trump the Street in the current quarter with revenue between $195 million to $215 million, handsomely ahead of analyst expectations of $170 million, probably driven by iPad sales. Whether the iPhone 4S miss was an aberration remains to be seen but if you are willing to take a risk with OmniVision, the returns can be mouthwatering.
- Broadcom (NASDAQ: BRCM) – Broadcom is up by 27% this year. While that may seem “modest” when compared to the previous two, there is an added advantage with Broadcom. The company supplies its chips, for facilitating Bluetooth and Wi-Fi connectivity in mobile devices, to both Apple and its nemesis Samsung. Throw in Broadcom’s cutting-edge product development and you have a winner on your hands. Its BCM4330 chip integrates Bluetooth, Wi-Fi and radio connectivity on a single chip, helping device makers create more efficient products. A slight downside came last quarter from the company’s Infrastructure & Networking business, revenue from which dropped 13%. But with the long-term viewpoint of this business being bright, Broadcom will probably overcome its sore point.
- Skyworks Solutions (NASDAQ: SWKS) – Radio frequency chips supplier Skyworks has seen its stock rise a terrific 66% so far in 2012. And there are quite a few points which make Skyworks a good bet among Apple derivative plays. The company’s chips have been used in Apple’s smartphone since the iPhone 3GS and was inside the 4S as well. The latest iPad also sports Skyworks’ chips (wherein in has two slots). Word is that Skyworks is on its way inside the next iPhone and can gain big time from it.
The takeaway
If you would have bought 1 stock of each of the above-mentioned companies, your total investment at the beginning of the year would have been roughly $74. And the value of your investment as I write this would have been around $108. This should be a reason good enough to keep an eye out for companies profiting from the Apple revolution.
Through this piece, I have tried to bring to you some companies, among many, which have been doing well by riding the coattails of Apple. Considering the way they have done so far and also by keeping their prospects in mind, I believe they can keep up the momentum for the rest of the year.
Motley Fool newsletter services recommend Apple. The Motley Fool owns shares of Apple and Cirrus Logic. TechJunk13 has no positions in the stocks mentioned above. 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.
