In this video, Fool.com analyst Eric Bleeker talks about ways for investors to profit from surging semiconductor sales to the smartphone segment. One company that's very well-positioned to benefit from continued mobile phone sales growth is Broadcom
However, Bleeker warns that the company might not be the deal investors expect. Broadcom has long used a compensation scheme where employees are paid lower base salaries, but are granted lucrative stock options. Since stock compensation is a non-cash charge, this causes the company's free cash flow to look extremely attractive relative to its position at the center of mobile growth.
The rub? To prevent diluting existing shareholders Broadcom must routinely repurchase large sums of common stock. The best approach for investors to take in this case is to subtract Broadcom's stock-based compensation from its free cash flow. After doing this, the company's valuation looks pretty dismal.
Bleeker recommends investors instead look to Broadcom's archrival, Marvell
Finally, for investors looking to directly target the mobile segment, both RF Micro Devices
To hear Bleeker's full thoughts on the subject, click on the video below: