Skyworks and The Internet of Things

07/27/2016 7:00 am EST

Focus: STOCKS

This featured recommendation exited the market for modem chips in 2010 and quickly became a leader in all aspects of the wireless communications sector, observes Roy Ward, editor of Cabot Benjamin Graham Value Investor

Skyworks Solutions (SWKS) designs high-performance mixed signal and analog microchips that enable connectivity among electronic devices.

It products are used in automotive, broadband, cellular infrastructure, energy management, GPS, industrial, medical, military, wireless networking, smartphone and tablet applications.

Demand for mobile Internet applications is surging with the broad proliferation of smartphones, net books, notebooks, tablets and other forms of connected wireless devices.

Skyworks continues to gain market share despite intense competition due to the company’s higher quality and environmentally friendly products.

The company is expanding sales to customers in the automotive, medical and industrial sectors, where profits are higher, product life cycles are longer and competition is less intense.

Skyworks is well positioned to capitalize on the rapidly rising Internet of Things, which allows objects such as appliances, lights, alarms and cars to be controlled remotely.

Skyworks is investing heavily in research and development to increase its market share of the Internet of Things, which is likely to exceed the growth of other connected devices, even smartphones, over the next five years.

Skyworks recently introduced new semiconductors that enhance operating battery life and are smaller and faster than existing semiconductors.

The new chips are designed for the newest Galaxy and iPhones and will provide a much needed boost to Skyworks’ sales later in 2016.

Skyworks’ 13.0 price-to-earnings ratio; the company’s PEG ratio of 0.68 is attractive. Its balance sheet is pristine with no debt and $1.2 billion in cash.

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By Roy Ward, Editor of Cabot Benjamin Graham Value Investor

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