As I saw firsthand at the recent SanFrancisco MoneyShow, the adoption of smartphones and tablets continues, observes Chris Versace; in his ETF PowerTrader, the advisors offer a play on this growing market.
I was astounded to see so many folks taking notes and trading on an iPad during the show. At breakfast one morning, our order was taken by a waitress who used an iPad.
Mobile carriers are looking for new markets, such as the Connected Car and the Connected Home. Auto companies are bringing high-speed mobile connectivity to cars and trucks.
RF semiconductors spur new markets and rising dollar content. While all of that is happening, mobile carriers continue to deploy faster next-generation networks, which means greater RF content per device.
My preference among RF technology suppliers is Skyworks Solutions (SWKS), given its strong position with a number of key device vendors such as Apple, Samsung, Lenovo, ZTE, Huawei, and LG.
Indeed, Skyworks is growing exposure to both the Connected Home and the Connected Car.
Having covered the mobile industry for years when I was at Friedman Billings Ramsey, I know there is a seasonal aspect to it.
Device volumes peak during the November-January time frame, which means suppliers like Skyworks see strong demand in August-November.
This year, there are a number of new product rollouts from Apple, Samsung, Mediatek and others, that should result in a far stronger second half of 2013, than first half, for Skyworks.
Buy SWKS shares and this call option play. All of this has Skyworks set to generate $2.55 per share in earnings over the coming twelve months—better than 16% growth year on year. A steep discount relative to that earnings growth rate derives a price target of at least $32.
Given that compelling upside, let's participate by buying Skyworks shares. Let's also be sure to capitalize on the seasonal bump, by buying the November $27 calls that last traded at $1.00. Because we are traders, let's do the smart thing and set our stop loss on SWKS, shares at $20.
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