We all know what happened in the stock market last week.
And while it seems as though volatility isn’t quite over, that’s not what I want to talk about today.
Instead, I want to focus on a company that’s found itself in a center-stage battle with President Donald Trump himself.
It’s got royalties coming in from all over the world.
And it’s not Amazon.com Inc. (Nasdaq: AMZN)…
Why Qualcomm Is Still a Long-Term Buy
Broadcom Inc. (Nasdaq: AVGO) was on the final leg of its campaign to take over one of the largest chip makers in the world, Qualcomm Inc. (Nasdaq: QCOM), in March…
But this plan quickly went off the rails, as Trump stepped in and blocked the deal, ending the impending partnership.
For Broadcom, this has been a long and tedious process filled with offer after offer, which Qualcomm denied – and Broadcom was on the edge of its seat, even considering shaking up Qualcomm’s board of directors to make the merger more promising.
And just 48 hours before the shareholder meeting was supposed to take place to determine if the merger would happen, Trump halted the progress, claiming it would raise many national security concerns.
But this isn’t the first time Qualcomm has found itself at the center of a media frenzy.
You see, Qualcomm’s patent library is considered one of the most valued in the world. It receives a royalty on every phone that has its chips inside.
And this has put it front and center for scrutiny.
For instance, A few years back, China filed an antitrust suit against Qualcomm, renegotiating its royalty rate and fining them close to a billion dollars.
On top of this, Qualcomm has a history of licensing fee battles. For example, Apple Inc., in one of its recent legal findings, claimed that Qualcomm acts like a “patent troll.”
This turmoil has caused most investors to run the other way – and in turn, most financial advisors have sent out a major warning to stay away from the company altogether…
But Qualcomm is trying to take the right steps to paint itself in a better light.
For instance, the issue surrounding its board members seems to have been resolved. CEO Paul Jacobs has been removed, and Qualcomm reduced its board to strictly 10 members…
And after being the target of a takeover, the company is trying to show it is still functioning and looking to expand. Recently, it offered to buy NXP Semiconductors NV (Nasdaq: NXPI) in a deal valued at about $44 billion.
But despite the negative press, people like Chad Morganlander, who is a portfolio manager at Washington Crossing Advisors, is looking to the future instead of focusing on the present. Morganlander made it clear that in his book, Qualcomm is a “value play” that would see above-market returns over the next year – and would be a great investment if you have patience on your side.
And I think he has a good point.
You see, this sudden peak in selling on this stock will soon come to an end – and with new developments coming out of the company, like the 5G technology, I believe the stock will hit a bullish run and continue to soar.
But that doesn’t mean we want to add this patent giant to your portfolio just yet. You see, Qualcomm is due to report earnings on April 25 – and we know earnings can flip any stock.
So for now, keep an eye on this stock, and if earnings fall our way, look into call LEAPS for this stock – the profit is yours to take.
— Tom Gentile
Source: Money Morning