Profits Inside the iPhone

Are you like me, kicking yourself for not having snapped up shares of Apple (Nasdaq: AAPL  ) before it presented the world with its exciting iPhone in late June?

Check it out. The stock was trading around $100 per share in early May, and last time I checked, it was trading above $140 per share. Can you say 40% in several months? Dang.

If you really want to ride the coattails of this successful product launch, you might still be able to do so. Just look inside the gadget. Because every time someone buys an iPhone, Apple shareholders have a reason to smile. But if you make a coating for the device's display, you should be smiling, too, every time the cash register rings.

At sramanamitra.com, I found a list of some components of the iPhone and their manufacturers. I don't understand many of them, but they seem to be in there. For example:

  • A Samsung chip, featuring an ARM processor and "two 512 Mbit Mobile DDR SDRAM dice." (Greek to me, but maybe not to you.)
  • A Broadcom (Nasdaq: BRCM  ) part, "which probably provides the I/O controller used for the video interface to the touch screen."
  • There are two Infineon (NYSE: IFX  ) parts, providing the phone's "baseband," and a "GSM RF transceiver."
  • A National Semiconductor (NYSE: NSM  ) "display interface serializer."
  • Micron (NYSE: MU  ) offers a "2-megapixel CMOS imager."
  • Marvell Technology (Nasdaq: MRVL  ) provides a wireless connectivity device.
  • Intel wireless flash is also included.

Spend a little time looking into these companies, and you might end up able to add a big winner to your portfolio before others think of it. Last time I checked, for example, National Semiconductor and Micron hadn't seen any major leaps in share price recently (just minor ones).

Buyer beware
Be careful, though, if you're treading in unfamiliar territory. One reason I haven't jumped into such companies is because I don't understand them all that well. Therefore, I don't have a good handle on their competitive strengths, the quality of their technology, their promise of growth, and so on. I don't have a good idea of how well these firms will be faring a few years down the road, and I'm certainly not going to buy them just because they're part of a hot product.

None other than Warren Buffett has repeatedly explained that he steers clear of companies and industries he doesn't understand. It has served him well. Remember, after all, that you can also get rich on other stocks -- those in industries you do understand well, such as perhaps retail, or health care, or transportation.

If you'd like some pointers to some very promising growing companies, I invite you take advantage of a free trial of our Motley Fool Hidden Gems newsletter. It was recently cited by industry watchdog Mark Hulbert as the best-performing newsletter of the past year, with its recommendations beating the market 45% versus 23% for the 12 months ended in May. A free 30-day trial will give you full access to all past issues, permitting you to read about all recommended stocks in detail.

Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article. She doesn't even own an iPhone. Intel is a Motley Fool Inside Value recommendation. Try any one of our investing services free for 30 days. The Motley Fool isFools writing for Fools.


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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 27, 2007, at 11:40 AM, jcrash wrote:

    True fools learn that you can buy stocks even after they go up.

  • Report this Comment On July 27, 2007, at 1:21 PM, davidengi07 wrote:

    In support of your comment that there still may be a way to ride the coattails of AAPL and the iPhone launch, I believe that can also be done by purchasing shares of AAPL today. In a survey I read of nine major brokers, the average of their 6-12 month price targets was a whopping $180/share! Today AAPL has almost reached $149/share. So that would still be an increase of $31/share at this price point, or about 21%. Impressive in today's free-falling market. And the highest estimate of the nine was a very bullish $211/share, equating to an increase of $62/share or =41.6%! It could happen. AAPL will probably release an improved version of the iPhone before Christmas 2007, fixing some of the problems / complaints out there, and boosting their profits still further. This is still a great investment. I sure am glad I purchased some at $14/share (before a 2:1 split, to boot) back in 2002! An over 2,000% return, if I do say so myself. And I've even seen some really ga-ga estimates for $250-300/share by the end of 2009. We'll see. Don't miss out, folks!

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