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Why I Invested Over $100,000 in SWKS

Why I Invested Over $100,000 in SWKS

What is Skyworks Solutions?

Skyworks Solutions, Inc. (SWKS) designs, develops, manufactures, and markets proprietary semiconductor products, including intellectual property worldwide. Its product portfolio includes amplifiers, attenuators, circulators/isolators, DC/DC converters, demodulators, detectors, diodes, directional couplers, diversity receive modules, filters, front-end modules, hybrids, LED drivers, low noise amplifiers, mixers, modulators, optocouplers/optoisolators, phase shifters, phase locked loops, power dividers/combiners, receivers, switches, synthesizers, technical ceramics, voltage controlled oscillators/synthesizers, and voltage regulators. The company provides its products for automotive, broadband, cellular infrastructure, connected home, industrial, medical, military, smartphone, tablet, and wearable applications. Skyworks Solutions, Inc. sells its products through direct sales force, electronic component distributors, and independent sales representatives. The company was founded in 1962 and is headquartered in Woburn, Massachusetts.

What does this mean in english? SWKS is a technology company on the cutting edge which designs a variety of popular parts for electronic devices, chips that go in popular smartphones (40% of its revenues come from Apple; as a key supplier of parts for the last several iPhones), and integrated parts for the Internet of Things including parts for smart electronics in automobiles.

Skyworks Solutions, Inc. Fundamental and Technical Analysis

Skyworks is trading at the time of this publication at $105/share in after hours trade. According to investors.com the stock is #10 in its category at this time, and is presently working on a technical chart formation known as a cup with handle with a $117.75 buy point (meaning if it hits $117.75 on volume 40% higher than normal, it could be a good time to buy). Overall, the companies fundamentals look good. SWKS had net income of over $1 billion dollars last year and has over $4.5 billion in assets with very little liabilities in comparison $500 million, and has over $1.6 billion worth of cash on hand. Skyworks has considered merging with another company within the last few years (as a strategic partner. The merger fell through but SWKS still has tremendous cash on hand to buy another company should a good opportunity present itself. The company is very financially healthy and has increased its dividend slightly over the last few years. Skyworks is a growth stock with high potential in a high growth industry.

My Beliefs About the Potential for Skyworks Solutions Inc. and the Growth of the Internet of Things

For those who believe in the Internet of Things and the tremendous potential for growth you may believe like i do that SWKS is a good investment. Skyworks has continually come out with new and innovative products, has increased its content in the latest iPhone and seems to have developed and is working hard to maintain its competitive advantages in supplying Apple. However, some believe that it is a bad thing that 40% of its revenue comes from Apple and until it is able to derive less of its revenue from Apple and more from other companies (to avoid being so heavily dependent upon Apple, which could potentially replace it with another supplier, thus drastically reducing SWKS’s revenue overnight). Skyworks was trading in the $25-$35 range in the last few years, and has gone up significantly, previously hitting around $113 or so before dipping all the way back down to $60 or so in mid 2016. It has now risen again to as high as $115/share recently and is presently trading at $105/share (although to be fair the DOW dropped over 700 points today, based on comments of a possible trade war developing). yesterday the stock was in the $108-$109 range.

My Beliefs About SWKS

As you can see from the above, Skyworks has all the makings of a winner, financially sound, great products, high growth market, strategic partnerships with an excellent company (Apple). You can also see that it has some risks and has made significant up and down moves over the last few years and could certainly do so again. So why invest over $100,000 in SWKS? Because I believe in the company. i believe in its products, and it is a financially sound company with a large cash position, its products are being put in the best products (iPhones for one), and some of the technology which it develops for motor vehicles for instance is not yet mainstream, but i believe it certainly will be within the next 5 years or so, leaving SWKS in a great position to continue to capitalize on the growth in these sectors.

Where could SWKS go from here? it could go up significantly. Analysts were previously estimated $120/share or more. I have my sights set much higher for this one. I believe it will hit much closer to $200/share within a few years. This is due to my belief they will continue to grow earnings and may continue to buy back stock from the open market as well/reducing the number of open shares on the market, which will increase the value of my shares.

Are there better places to invest this $100,000? Should I diversify more broadly? The answer to both is quite possibly yes. However, this is the path I have chosen and will continue to follow for at least the next couple of years (unless something drastic changes with Skyworks, then I may reconsider). if things go well, my investment could double or more. If things go poorly my investment could get cut in half. Only time will tell, but I like the chances with this one.

Conclusion:

Skyworks Solutions Inc. is a good overall investment from a fundamental analysis standpoint, and should it hit $117.75 it was also be excellent from a technical analysis standpoint. i will leave the money invested and see how it performs over the next year or two, unless something significant should change. The company appears well positioned to capitalize in what i personally believe is an industry that will continue to grow and develop. I believe that SWKS has a very strategic partnership with Apple and in spite of the risk of Apple cutting back from them, they have continued to gain more content in newer, more popular phones and I believe will continue to do so. Skyworks is well positioned to increase in value in my opinion.

 

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