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Qualcomm (QCOM) Has Risen 45% in Last One Year, Outperforms Market

If you are looking for the best ideas for your portfolio you may want to consider some of GDS Investments top stock picks. GDS Investments, an investment management firm, is bullish on Qualcomm Inc (NASDAQ:QCOM) stock. In its Q2 2019 investor letter – you can download a copy here – the firm discussed its investment thesis on Qualcomm Inc (NASDAQ:QCOM) stock. Qualcomm Inc (NASDAQ:QCOM) is a semiconductor company.

In July 2019, GDS Investments had released its Q2 2019 investor letter. Qualcomm Inc (NASDAQ:QCOM) stock has posted a return of 44.8% in the trailing one year period, outperforming the S&P 500 Index which returned 10.9% in the same period. This suggests that the investment firm was right in its decision. On a year-to-date basis, Qualcomm Inc (NASDAQ:QCOM) stock has risen by 25.5%.

Let’s take a look at comments made by GDS Investments about Qualcomm Inc (NASDAQ:QCOM) stock in the Q2 2019 investor letter.

“In the first half of 2019, we continued our position in QUALCOMM Incorporated (NASDAQ: QCOM). The big news for this company is that it and Apple, Inc. (NASDAQ: AAPL) agreed to a comprehensive global settlement of all litigation between the two companies. Pursuant to that settlement, Apple will make a one-time payment to Qualcomm (which is estimated to be between $5B and $6B) and obtain a new six-year license. Immediately following the settlement, Qualcomm increased its Earnings-Per-Share run-rate by $2.00 share. Based on previous unit demand quantities, that increase implies that Apple is paying a royalty rate of roughly $9.00 per iPhone.

In settling with Qualcomm, Apple acted in its own best business interests. Over the years, Qualcomm built a massive research and development operation. Facing down that operation, Apple was very likely never going to be able to create an in-house modem business quickly enough to stay inside the 5G growth curve. Meanwhile, Apple’s other modem supplier, Intel Incorporated (NASDAQ: INTL), was losing money in that field and years behind Qualcomm’s rollout schedule. Indeed, so field-changing was the Apple-Qualcomm settlement that, the day after its announcement, Intel stated its intention to altogether exit the smartphone 5G modem business. Then, in mid-July, Intel announced that it would sell its modem patents and other related assets to Apple for $1B. That move strongly suggests that, even while it enjoys the benefits of its license arrangement with Qualcomm, Apple may try to develop internally its own 5G modem technology.

The market responded quite favorably to the Apple-Qualcomm settlement… the company’s share price increased more than 50% within days after the settlement was announced. Frustratingly, a portion of the gain coincided with a flurry of negative headlines about the company. Those headlines included postponement of the United States-China trade deal and an unfavorable ruling by a U.S. District Judge about Qualcomm’s licensing practices in the computer chip market. Qualcomm appealed that ruling and several government agencies have come out publicly in support of Qualcomm’s business practices.

All of the recent headlines about Qualcomm have generated some higher than normal volatility for the stock. At a recent price of $75/share, and with over $7.50-$8/share in core EPS, we intend to hold the position until some of the uncertainty dissipates and a higher multiple ensues.”

In Q2 2020, the number of bullish hedge fund positions on Qualcomm Inc (NASDAQ:QCOM) stock increased by about 23% from the previous quarter (see the chart here), so a number of other hedge fund managers seem to agree with Qualcomm’s growth potential. Our calculations showed that Qualcomm Inc (NASDAQ:QCOM) isn’t ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. You can subscribe to our free enewsletter below to receive our stories in your inbox:

Disclosure: None. This article is originally published at Insider Monkey.