Why NQ Mobile, Skyworks Solutions, and Ericsson Are Today's 3 Best Stocks

The S&P 500 roars higher following strong tech earnings reports as NQ Mobile, Skyworks Solutions, and Ericsson explode higher.

Jul 18, 2014 at 5:15PM

Yesterday may have been the worst day the broad-based S&P 500 (SNPINDEX:^GSPC) had witnessed since April, but that's all forgotten today, with the index surging despite what would be perceived to be negative economic data.


On the data front, the Thomson Reuters/University of Michigan consumer sentiment reading for July decreased to 81.3 from a reading of 82.5 in June. This was well below expectations from economists, who had been expecting consumer sentiment to rise to around 84. Lower consumer sentiment signals that people feel less confident about some combination of their short- and long-term economic outlook, which is a potentially bad precursor for consumer spending, a big component of U.S. GDP.

Also, June's leading indicators rose by just 0.3%, when Wall Street's expectation was for an expansion of 0.5%. Similar to the weaker sentiment figures, this could signal that consumers' abilities to push the economy higher is waning, and we could be nearing a period of slower growth.

However, strong earnings reports from a number of technology stocks, as well as a strong defense of the biotech sector by ISI Group analyst Mark Schoenbaum, went a long way to help the S&P 500 reclaim nearly all of yesterday's lost ground. By day's end the S&P 500 ended higher by 20.10 points (1.03%), to close at 1,978.22.


Source; Simon Cunningham, Flickr.

Among individual stocks, none stood out as having a wilder day than China-based mobile security firm NQ Mobile (NYSE:NQ), which began the day by plunging more than 20%, only to finish higher by 15.2% after announcing that it had fired its auditor PricewaterhouseCoopers. NQ followed up its announcement with the hiring of Marcym Bernstein Pinchuk as its new independent auditor.

On one hand, as my Foolish colleague Steve Symington pointed out earlier today, it's great to see NQ Mobile bringing another reputable auditor on board, as it could cause investors who are concerned about the integrity of the company's financials to relax a bit. Then again, switching auditors following ongoing allegations of revenue overstatement from critics is only going to enhance the rumors that NQ hasn't been fully forthcoming with its deals. This continues to look like a situation you'll want to stay far, far away from for the time being.

Lagging not too far behind NQ Mobile is analog semiconductor product producer Skyworks Solutions (NASDAQ:SWKS), which roared higher by 14.1% after crushing its already boosted third-quarter results, and raising its fourth-quarter forecast. For the quarter, Skyworks reported a 35% increase in year-over-year revenue, to $587 million, well ahead of the $570 million guidance given last month and expected by Wall Street. Profit for the quarter jumped 54% to an adjusted $0.83 per share, as adjusted operating margins grew 480 basis points, to 30.5%. By comparison, the Street was only anticipating a profit of $0.80 per share in Q3.

If you're looking for a reason why Skyworks' results were so strong, look no further than Apple; its strong iPhone sales continue to provide the spark for Skyworks. As long as Skyworks remains innovative, it has a good chance of remaining a key components supplier for Apple.


Looking ahead, Skyworks announced that it sees fourth-quarter revenue up 43% year over year, to $680 million, with adjusted EPS rising 56% year over year, to $1. The consensus estimate had only been expecting Skyworks to earn $0.87 in EPS on $606.6 million in revenue. This was a blowout of epic proportions for Skyworks and, assuming it finds a niche in the upcoming iPhone 6, which I'd say is probably better than 50-50, it could have further room to run higher.

Lastly, telecom equipment and service provider Ericsson (NASDAQ:ERIC) tacked on 8.7% after it, too, reported better-than-expected quarterly results. For the quarter, Ericsson announced a 1% decline in revenue from the year-ago period, but did see its revenue improve 13% from the sequential first quarter. Gross margin, however, improved 400 basis points, to 36.4%, allowing its EPS to improve to 1.07 Swedish krona per share (or about $0.16 in U.S. dollar terms). Analysts have been expecting Ericsson to report only 1.02 in Swedish krona ($0.15), so this was a modest, but welcome, bottom-line beat for the telecom giant.

Investors really seemed to latch onto Ericsson's statement that it's seeing robust growth in the Middle East, China, and India, which have the potential to deliver decades of improved margins and profitability with Ericsson still scratching the surface in these regions. At just 14 times forward earnings following today's pop, Ericsson isn't particularly expensive; but given its lack of consistent top-line growth, I believe I'd be patient and stick to the sidelines for the time being.

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Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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