Wedgewood Partners: Apple Stock Suffering From “Hit-Driven” Fears; QUALCOMM Balance Sheet “Fortress-Like”

Wedgewood’s stake in Qualcomm Inc. (NASDAQ:QCOM) amassed 4.36% of  Wedgewood Partners’ portfolio at the end of June as the fund held 4.01 million shares valued at $215.01 million. The number of funds from database long Qualcomm declined to 48 from 59 during the second quarter. Wedgewood Partners noted Qualcomm for making progress on technology licensing front. The technology licensing business segment of Qualcomm has higher margins than its more hyped-up Chipset Franchise segment and contributes two-thirds to three-quarters of its total profitability. The company stock, with 14x Forward P/E earning is relatively undervalued as the company has $20 billion in cash on its balance sheet.  The investor considers that Qualcomm’s long-term growth will increase the value of its stock, adding that their “conviction in the stock is reinforced by the Company’s excellent financial health, which is a byproduct of their superior profitability”.

Cognizant Technology Solutions Corp (NASDAQ:CTSH)’s stock declined 16% this year so far. Wedgewood Partners held 5.62 million shares worth $321.95 million, being one of the 40 investors in our database that held shares of Cognizant Technologies at the end of June. The fund pointed out that the company’s stock showed defensive performance as its management sounded cautious over two its core vertical verticals, Health-Maintenance Organization and Banking & Financial Services. However, despite the concerns, both verticals seem to be in a robust condition, boosting the chances of good performance by Cognizant. The company is expected to perform well in the long term, but might face some challenges in the short run.

“Despite these recent headwinds to topline growth, we think Cognizant maintains a long-term runway for generating attractive organic growth, as the company benefits from the secular shift of IT spend towards digital solutions,” Wedgewood said.

Stericycle Inc. (NASDAQ:SRCL)’s stock has slid by 38%, year-to-date and the fund 2.7 million shares worth $281 million at the end of June. Overall, 22 funds tracked by us held shares of Stericycle at the end of the second quarter, up by four funds from the end of March. In the letter, Wedgewood said that it did not increase its stake during the third quarter as it retained cautious approach towards the stock as despite its low valuation. The fund added that the company is likely to remain under pressure on account of new developments happening in their core Regulated Medical Waste (RMW) segment.

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