Recent Buy – Qualcomm Inc

Whenever I make a purchase, I like to share my buys to document and illustrate how I am building my income stream over the course of months/years. My main goal is simply to keep investing at regular intervals and build my passive income over the course of time. In a sort of ways, I am building my own pension, hoping to get to a point where I can simply live off my dividends without touching my principal investment. The current volatility in the market provides an opportunity to pick up shares at attractive valuations which have been hard to find in the past. I decided to put some of my cash to work.

I added to my position in Qualcomm Inc (QCOM) with 20 shares @ $62.00. The stock yields 3.09% adding $38.40 to my annual dividend income.

Recent Buy Decision

  • Qualcomm is the world leader in wireless digital communication products. The company’s products or licenses can be found in almost every mobile device produced in the recent years. As a result, the company’s revenue is diverse and robust.
  • Whether a consumer buys an Apple (AAPL) iPhone, or Google (GOOG)(GOOGL) Android device, either a Qualcomm chipset or Qualcomm technology license can be expected to be present. No matter who wins the smartphone war, Qualcomm is the common denominator and will surely get a piece of the pie.
  • Some investors have raised questions about growth in smartphone – but I remain bullish as technology keeps improving taking us from one generation to the next, and Qualcomm leads the industry on this front.
  • A number of new market segments are on the horizon for development – wearables, smarthomes, smartcities, Internet of Things (IoT), the connected-car automotive sector etc.
  • Qualcomm pays $1.92 in annual dividends and currently yields over 3%. The company is also a proven dividend grower – having grown dividends for 13 consecutive years, with a 5-yr dividend growth rate of 19.2%.
  • The company is almost debt-free, having only recently deciding to tap into the debt market to increase buybacks and dividends.
  • Strong balance sheets (the company holds ~$16B in cash)
  • Attractive valuation (see chart below)
  • Read my full dividend stock analysis here

QCOM-FastGraphs1

Risks

  • The company came under intense pressure from China – when partners and technology users simply refused to pay the licensing fee. The Chinese government investigated Qualcomm for monopolistic methods and Qualcomm settled with a payment of $975M in antitrust fine. Similar issues may arise in the future.
  • The China issue has been a drag resulting in the stock being punished severely – now down ~16% YTD due to the fact that most of Qualcomm’s revenue comes from the Asia-Pacific region.
  • The  international earnings also cause a drag due to the strong US$.
  • The executive pay has risen alarming high in 2014 as they reward themselves handsomely.
  • Recent investments have been questioned by analysts and Qualcomm has acknowledged that some will need to be revisited and reviewed.
  • A tech company always have to be on the lookout from disruptive upstarts stealing market shares. Competition from bigger players such as Intel (INTC) is also mounting on IoT, smarthomes, connected-car fronts.

Further Reading

Full Disclosure: Long AAPL, QCOM. My full list of holdings is available here.

32 thoughts on “Recent Buy – Qualcomm Inc

    • Thanks for sharing your thoughts and stopping by, MDP.
      Both CSCO and INTC are great companies that have done well and will continue to move forward. They both made a lot of mistakes in the past, but have now addressed them and things are starting to look better.

      Happy investing
      R2R

    • I just realized that Ive been adding shares in this company each summer from 2013. Love the long term prospects…hopefully the risks mentioned are mitigated.

      Thanks for stopping by. Have a great wknd yourself.
      R2R

    • It sure is, Lanny. The company has been right there enabling the explosion of mobile devices and the technology. The wireless phenomenon is nowhere near saturated…a great company to own for the long haul.

      regards
      R2R

  1. R2R,

    Great addition here, their dividend growth has been impressive. I’ve been eyeing IBM , QCOM and CSCO as a new tech purchase. I sold out of INTC a little early but would like to add a technology company back to my portfolio.

    Thanks for sharing!

    • As you can tell, I am a fan of QCOM and all things they do. Of the other ones, you mention, I like CSCO too – and to a certain extent INTC. I am not a fan of IBM though, since they have just resorted to financial engineering…the company needs overhaul and needs to refocus if they are to continue forward.

      Good luck with your purchases. I look forward to see which one you pick.
      R2R

    • Hi gawilley,
      The fast graphs is a bit misleading since I took the screenshot with 20 year timeframe, which brings up the average normal PE very high due to the Dot com bubble data. You should look at a closer range – perhaps 5Y or 7Y, in which case the normal PE is approx 17. Still, the current price is below the blue line – so its undervalued according to fast graphs (and I concur – based on my models).

      R2R

  2. Happy Sunday, RTR,

    Yes, indeed, your comment is spot on. The default of FastGraph’s is to show the “all” readings, which can be quite different from the 5yr or 10yr performances. What a tool Chuck has given us DGI’ers!

    I also agree with your earlier comment about IBM. Sure, they can make some DGI’s salivate, but as an I.T. Pro with 30+ years in the trenches, IBM’s best days are clearly behind it and they will stay there unless they rediscover themselves.

    Right now, I’ve got my sights on TROW and WMT, after having recently added to KMI, T, and EMR.

    Happy Investing!

    • I just started subscribing to FastGraphs since a couple of months ago and really like. I think its a great resource – Chuck sure has built a fantastic tool for DGIs.
      Good to hear that you feel the same about IBM – I work in the tech sector as well – although not a 30yr veteran like you…just 10 years 🙂

      Those are some great names on your watchlist. Happy investing!
      R2R

  3. I’m new to it as well and there is much to learn about it. I won’t make buy/sell decisions based solely upon its data, however, it is but one more tool in the due-diligence box.

    10 years? I’m sure you have much more hair than me and less of it gray!! 🙂

    See you in the trenches!

    • Hah! Most of my hair seemed to have escaped – it doesnt bother me, unless I am in the sun and realize that I dont have a hat and debate about putting sunscreen on my head.

      Checked out your blog and seems really new. Looking forward to reading some great stories in the journey to FI.

      cheers
      R2R

  4. Less $’s spent on hair cuts and hair care means more is available for the limit orders, right?

    That IS why we are the way we are? No?

    The blog site is rather new, but will be built-up as time goes on, similar to other sites. Too much time in the trenches left little time for writing about (but didn’t stop me from pursuing) financial independence. I love writing and commenting, as it’s all part of the learning process that I have a voracious appetite for.

    Having achieved FI, I work because I want to, not because I have to. I’ve got great clients and I really appreciate them.

    • Didnt know that you had already achieved FI. May I recommend an ‘About’ page on your blog? Like you, I really enjoy writing and this blog was started as an outlet to share and at the same time develop my writing skills.

      Good to hear that you are working because you love it. While I need to work because I have to, I really do enjoy my work as well. I went through a period for a year or two where I hated every single day, but now I am back to the joy I had earlier in my career – challenging tasks and responsibilities, constant learning and innovating.

      regards
      R2R

  5. The “About” page is forthcoming as are a lot of refinements to the site and the content. Most consumers of the information are shocked to find out just how much time it takes for us to build out these sites and keep them well maintained. I’m sure you’re familiar with that!

    I feel really odd, stating that I have achieved FI – mostly because, who knows what tomorrow brings? How do we KNOW that we’ll be OK with regards to finances 3 years down the road, 5 years, 20 years? We never know what curveballs life has to throw at us – so we live frugally and invest wisely. Personally, came from “nothing” and I still live so far beneath my means that I couldn’t find my means with GPS and a paid navigator! Suppose that’s why I am so thankful for what I’ve overcome in my journey and for what I can pass on to my children and my network of DGI’s.

    It’s very difficult slinging mud in the I.T. trenches and I too, questioned what I was doing as it took a huge toll on my personal life (I didn’t have one) and my health. But like our pursuit of FI, we know we have to keep soldering on. Not every investment of time and/or money will pay off, literally. Yet, we know we must keep marching on.

    • I hear you, gawilley.
      Like you, I have a similar story too – came from nothing, although I had a bit of a help from family since I was able to graduate without any student debt. My wife and I live well below our means as well – but we do have a very comfortable life – and there are absolutely no complaints.

      Haha…no worries. Like any consumer, I am demanding more details from reading your blog. Looking forward to read some great articles!
      cheers
      R2R

  6. Hey R2R,
    Got on the board yesterday, with a new position in QCOM. I like the triple BUY rating and the DGR is amazing! FastGraphs shows it firmly in buy territory, as well. Glad to be in there with you!

    • A4I,
      QCOM is a great company and has a bright future…good to have you as a fellow shareholder. Today is going to be an interesting day – lots of rumors abound about the future of the company and possibility of a spinoff announcement.

      Best
      R2R

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