NEW YORK (TheStreet) -- Last August I told you that chip giant Qualcomm (QCOM) was the best way to play the semiconductor recovery. At the time, Qualcomm shares traded around $65. The stock closed Tuesday at $76.71, posting close to 20% gains since my August buy recommendation.
Last summer, after two years of strong growth, the entire chip sector was being decimated by low average selling prices. Mobile devices had become commoditized. Even worse, those in the higher-end category had become saturated. With very little growth in sight, the chip spree was seemingly over. But that was the time to buy.
Qualcomm was the obvious choice.
In August I said:
"I continue to believe in Qualcomm's business and the stock, which seems cheap at current levels. I would be adding shares until the company shows meaningful signs of slowing growth. The stock has enough momentum to reach $75 to $80 by the end of the year -- if, for no other reason than the fact that regardless of who comes out on top in the mobile race, Qualcomm wins."Qualcomm stock ended the year at $73.90. Ever since, the stock has made several new 52-week highs. Gone are the fears about chipset margins and market share losses. The company has begun to benefit from a slight recovery in average selling prices and stronger unit shipments -- precisely what I predicted would happen. Had investors listened to TheStreet's Jim Cramer, who said on Dec. 13 that Qualcomm stock had a strong chance of hitting $80 per share, they would have made an easy 6% on that trade. I don't deny that lately Qualcomm hasn't been as robust as it was in previous years. Even so, Qualcomm's results have been better than its closest rival. Plus, as long as the mobile devices race continues between Apple (AAPL) and Samsung (SSNLF), there was no way for Qualcomm to lose. And that's the point Cramer was making. Qualcomm's chip is at the center of their respective devices. Investors should seek to understand what type of advantage this presents over rivals like Intel (INTC) and, to a lesser extent, NVIDIA (NVDA) -- which, according to some, is emerging as a new threat. Meanwhile, Qualcomm's management was never asleep at the wheel. Although guidance over the past couple of quarters has come below consensus estimates, management remains committed to preserving Qualcomm's dominance -- particularly in next-generation chip technology. The Street understands this now.
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