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Let Atmel Be Your Everything

Rich Duprey
July 21, 2012

With more than 5,400 stocks to choose from, the universe of investment possibilities is enormous. You could get tips over the company water cooler or from Internet discussion boards. A better way might be to look for stocks based on what you already know and own.

Motley Fool CAPS helps you focus your energies by providing you with a personalized Stock of the Day. Using its supercomputer, it looks at stocks currently in your active pick list, stocks picked by highly rated players with lists similar to yours, industries in which you currently have active picks, and Saturn's orbit around the sun. Well, maybe not that last one -- but it targets areas in which you already have an interest.

By pairing up the opinions of some of the top investors in the CAPS community, CAPS provides you with a handful of companies on which to begin your own due diligence and research.

Buy what you know
Based on my outperform ratings on chipmakers like Triquint Semiconductor (Nasdaq: TQNT  ) and Skyworks Solutions, as well as my underperform rating on Spreadtrum Communications in the broad semiconductor and semiconductor equipment sector, the CAPS supercomputer thought I also might be interested in another chipmaker in the burgeoning mobile and tablet markets, Atmel (Nasdaq: ATML  ) , one of five Stocks of the Day it offered up for my consideration last week.

There's been no real let-up in consumer demand for mobile computing and communications technology, so let's see what Atmel has going for it that might warrant an investment, even if the supercomputer hasn't yet picked it for you. Just remember, as smart as the CAPS algorithm may be, it's still just an algorithm, so be sure to look before you leap on any of its suggestions.

Atmel snapshot

Industry Information Technology
Sector Semiconductor and Semiconductor Equipment         
Market Cap $2.8 billion
Revenues, TTM $1.7 billion
Return on Capital, TTM 17.5%
Dividend and Yield NA/NA
Cash $299.1 million
Long-Term Debt $0.0 billion
Free Cash Flow, TTM (OCF-CapEx) $146.5 million
Recent Price $6.40
CAPS Rating (out of 5) ****

Source: Motley Fool CAPS; S&P Capital IQ.

On the go
Pairing the dismal outlook interactive channel guide maker Rovi provided with the weak guidance for Blu-ray players offered up by sound technician DTS, investors took to heart the message that the consumer-electronics market is facing some strong headwinds ahead. Yet the CE segment isn't monolithic, and there remain bright spots for investors to pick and choose from.

Mobile communications and computing, as I mentioned, remains a source of strength, though even there investors can't just buy indiscriminately. For example, BlackBerry maker Research In Motion is teetering on the brink while Samsung's Galaxy series is becoming one of the hottest smartphone systems around. Similarly, Apple (Nasdaq: AAPL  ) iPads remain the go-to tablet while Android-based models still seek to gain traction. More to the point, Apple's iPhone continues to sell like hotcakes, with 35 million units selling in a non-holiday quarter!

Going where the money is
Both of those trends represent opportunity and risk for Atmel, whose chips are featured in numerous Android tabs but are also what drive the touchscreen interfaces on several Symbian and Android handsets. Nokia's (NYSE: NOK  )