Forget Apple — Here’s How We Can Trade The Global Smartphone Market
As the holiday shopping season heats up, we are hearing a great deal about the supply chain. This was a topic most of us never even thought about a few years ago.
As investors, we were assured by management that supply chains were optimized to maximize shareholder value. As consumers, we were assured by fully stocked shelves in stores and a never-ending supply of new products.
Somehow, the finely tuned supply chains became a problem this year. Many companies are reporting slower sales because they simply can’t get what they need. Even companies like Apple are facing problems.
According to The Wall Street Journal, “Foxconn Technology Group, the biggest manufacturer of Apple Inc.’s iPhones, said the global supply-chain crunch is expected to last until the second half of next year, a sign of headwinds that electronics shipments could continue to face.”
Of course, Apple will remain profitable, even with fewer iPhones to sell. Analysts expect the company to control 23.1% of the market share for smartphones.
If Apple meets those expectations, it will be the largest smartphone maker in the world, displacing Samsung, which is expected to have a market share of 19.4%.
But that news misses the most important story in the smartphone market, in my opinion. If Apple has a 23.1% market share, that means non-Apple phones have a 76.9% market share. That’s millions of handsets — and there’s an investment opportunity in that high market share for a company that supports Android, or other non-Apple, phones.
How We Can Trade This…
QUALCOMM Incorporated (Nasdaq: QCOM), estimates that more than one billion high-end phones a year will be sold beginning in 2024. The market for less technologically advanced phones will still be active and measured in hundreds of millions of phones a year.
Qualcomm supplies processors to top-tier Android phones, including Chinese brands Xiaomi, Oppo, Vivo, and Honor. In the most recent quarter, revenue from chips for handsets increased by 56% compared to the same quarter last year. The company expects continued growth as a competitor, Huawei, is forced to leave the smartphone market after the imposition of U.S. sanctions.
As the world moves to 5G devices, Qualcomm should be able to increase its sales. In addition to providing the phone’s processors and wireless modems, QCOM also makes filters, power amplifiers and other radio frequency front-end chips.
These chips are also needed in the Internet of Things, which includes items like wireless headphones and virtual reality headsets to retail checkout readers and digital controls in cars.
This is another growth center for the company, with revenue for these chips up 55% in the past year.
In a call with analysts after the most recent earnings announcement, the CEO attributed the strong results to a multi pronged strategy to overcome supply chain woes, including multi-sourcing and capacity expansion.
While traders don’t have all the details on what that means, they did like the news and sent the stock’s price higher, triggering an Income Trader Volatility (ITV) “buy” signal. The indicator (red line) is below its moving average (blue line) in the bottom panel of the chart below.
For those who aren’t familiar with ITV, this is the award-winning indicator I use to identify trades over at my premium Income Trader service. Think of it as a volatility indicator (like the VIX), but for individual stocks and ETFs. So lower volatility is generally a good thing.
That’s why I recently recommended a short-term trade on QCOM that will allow us to get paid instantly.
If all goes according to plan, we’ll make about 3% on our capital in 52 days or less. And because this is a short-term trade, we can turn right around and make a similar trade again for even more income.
I believe trading this way is one of the best ways to protect and preserve your capital in an uncertain market like the one we’re in now. It’s easy to learn, and you’ll generate far more income than you ever thought possible. In fact, you could easily generate thousands of dollars per month trading this way.