It's not often that a stock trading at nearly 100 times trailing earnings makes for an attractive investment opportunity, but Fools need to be ready to play the contrarian when the situation presents itself. ARM Holdings (Nasdaq: ARMH) has been up more than 33% since Jan. 1, and the stock has more than tripled in the past year. This dizzying growth actually belies an even bigger growth story that ARM is uniquely positioned to take advantage of as the market leader in mobile chipsets.

It shouldn't be news to anyone that smartphone market growth has been downright Malthusian -- smartphones outsold PCs for the first time ever in Q4 2010, with 100.9 million units shipped vs. 92.1 million PCs. That's an 87% increase in handheld sales over the previous year. Add to that the projection that smartphone sales may top 500 million units in 2011 (up from around 270 million in 2010), and the picture of the importance of this fast-growing market becomes clear.

ARM recently struck a wide-ranging licensing deal with mobile-chip behemoth Broadcom (Nasdaq: BRCM) that will allow Broadcom to pair current and future ARM processor designs with its own baseband chipsets. This is an enormous opportunity for ARM to penetrate the low-cost global smartphone market that Broadcom is currently courting with its BCM2157 baseband chipset, an Android baseband chipset for phones retailing for less than $100.

Couple this with news that the next generation of Microsoft (Nasdaq: MSFT) Windows will utilize ARM, as well as Intel and AMD chip architecture, and ARM sits on a trifecta of long-term growth prospects: (1) high-end devices in Apple's iPhone and iPad, and Texas Instruments' OMAP chipsets, which power some of the best Android handhelds; (2) low-end devices in Broadcom's new Android baseband; and (3) crossplatform, with Windows 8.

As production expands and ARM licenses more of its chip blueprints to a market that is designing more software built on that chip architecture, ARM's 21% net profit margin could potentially skyrocket because of the increased volume and virtuous cycle. Remember, as an intellectual-property company, the more licenses ARM sells, the more handsome the return on its R&D investments, and, more importantly, the more incentive companies that have built OSes on those chip designs have to keep ARM in the game for the long run. We saw it with Intel on PCs, and it looks like history is repeating; we will see it with smartphones.

Technology is a rapidly changing industry, and therefore a risky one. Although ARM has yet to rebound to its pre-tech-bubble highs, it is a company that has demonstrated keen resilience in the last decade -- one for which value must be measured by its future potential in a sector that is experiencing serious growth.

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