I love a bargain, whether it is in a supermarket or the stock market, especially when a fundamentally strong global brand with almost monopolistic like qualities, is oversold based on both fundamental and technical criteria’s.

Qualcomm (QCOM), a global leader in wireless technology licensing and mobile device chipsets which has a dominant market share in both businesses.

With its myriad of intellectual property patents over 3G and 4G wireless communication, allowing it to continually collect an abundance of royalties for every smart phone out in the market, it’s a company which is very under-appreciated and hence its current under valuation.

Although Qualcomm’s licensing business accounts for a third of the company’s revenue, its high margins represents over two thirds of its profits.

It has had its fair share of problems lately due to Samsung and Apple not fully utilising its chipsets in their new phones and tablets; but it is still a force to be reckoned with.

People forget that most of the world’s current phones are still in migration phase from 2G to 3G and 4G; hence Qualcomm is well positioned to continue enjoying this golden stream of royalties.

Qualcomm continues to expand away from just phones and tablets into other areas like the ‘Internet of Things’ (IoT) and lately, remote drones and its cameras.

An opportunity therefore exists today to purchase stock of this leading wireless technology licensing and mobile chipset manufacturer, Qualcomm (QCOM).

The following is what makes me want to add Qualcomm to my long-term portfolio over the coming days. I already hold some Qualcomm. Here I will get straight to the point, as I believe it makes for efficient decision-making.

Please note, I am both a long-term deep value investor as well as a medium-term trader who utilizes the combination of both fundamental and technical analysis to form a view of every investment I make. Doing so I believe leads to low risk and superior market beating returns over the long run.

Fundamental Factors;

The Bad

Forecasted temporary weak Earnings per Share growth (EPS)

The Good

Valuation of $70-$75 (approx.) based on adjusted discounted cash flow analysis, so QCOM is over 25% undervalued at current prices.

Earnings per share (EPS) have been good for the past 5 years.

Return on Equity (ROE) of over 20% is more than satisfactory.

Net Debt to Equity (D/E) of 0%. It has no net debt.

Long-term cash flow relative to reported profits is strong.

And long term funding surplus.

 

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Technical Factors;

The Bad

Clearly broken the $60 and $55 key price support levels.

Currently below both 50 and 200 day moving averages.

Seems to follow a confirmed down trend line.

The Good

The stock is oversold on a variety of momentum indicators and buying volume seems to be increasing at these prices.

It is likely that value seeking fund managers like myself are coming in to take advantage of these depressed prices.

Other Factors

For longer-term investments, I generally like to see who else is on-board with me and where the smart money has found its home.

In my opinion, actions always speak louder than words.

In this case, SEC filings report the following world-renowned deep value investors holding significant stakes in Intel.

Jana Partners – 10.73% of portfolio managed
David Rolfe – 8.43% of portfolio managed
Zeke Ashton – 4.85% of portfolio managed
Sarah Ketterer – 3.2% of portfolio managed
Jeremy Grantham – 2.03% of portfolio managed

Conclusion

Qualcomm is currently undervalued and temporarily out of favour but it is a fundamentally strong company with monopolistic characteristics and smart money support.

I have been personally adding more Qualcomm into our long-term portfolio over the past few days and will continue to add more.

To see how you can easily identify undervalued leading stocks like Qualcomm yourself, click here.