NXP SEMICONDUCTORS N V EUR0.20 (NXPI)
57,84 USD @ NASDAQ
+3,45% | +1,93
04/03/2014 22:00
New, Unknown Tech Stocks Are the Best Bargains
NXP SEMICONDUCTOR
Even as the European economy goes from bad to almost as bad, life at most large and medium-sized companies goes on as usual — and innovation is continuing at a frantic pace.
One of the more interesting tech stocks to emerge on the continent in the past few years is NXP Semiconductors (NXPI), a spin-out from electronics giant Philips in the Netherlands. NXP sports a $5 billion market capitalization, has logged more than 11,000 issued and pending patents, and has 11 manufacturing sites worldwide.
The company's chips are used in everything from automobiles and lighting to computers and televisions. It counts among its biggest customers Apple (AAPL), Delphi
NXP was established as a separate unit in 2006, but because it's a former division of Philips, the firm has more than 50 years of management experience under its belt. CEO Rick Clemmer has been at the helm since 2009. An industry veteran, he previously spearheaded the turnaround of Agere Systems (now a part of LSI (LSI)), which was spun out from Lucent Technologies. Of course, Lucent was also a spinout of Ma Bell in the U.S. many years ago.
Despite being domiciled in the Netherlands, only about 3 percent of NXP's revenue is generated in its host country. China, which generates 36 percent of sales, is the biggest revenue generator, followed by Germany at 12 percent, Singapore at 9 percent and the U.S. at 8 percent.One of the more interesting tech stocks to emerge on the continent in the past few years is NXP Semiconductors (NXPI), a spin-out from electronics giant Philips in the Netherlands. NXP sports a $5 billion market capitalization, has logged more than 11,000 issued and pending patents, and has 11 manufacturing sites worldwide.
The company's chips are used in everything from automobiles and lighting to computers and televisions. It counts among its biggest customers Apple (AAPL), Delphi
NXP was established as a separate unit in 2006, but because it's a former division of Philips, the firm has more than 50 years of management experience under its belt. CEO Rick Clemmer has been at the helm since 2009. An industry veteran, he previously spearheaded the turnaround of Agere Systems (now a part of LSI (LSI)), which was spun out from Lucent Technologies. Of course, Lucent was also a spinout of Ma Bell in the U.S. many years ago.
I recommended NXP Semi to readers on Sept. 17, 2012, about two years after its IPO, which is about the outer limits of the age range we consider in this strategy. At the time, the stock had doubled since its IPO, but had since faltered and was flat-lining. But I liked its positioning in the new versions of Android and iPhones, as well as cars, and sensed it would rev up soon.
The idea required some patience, as the shares were at the same price for us seven months later. But ultimately, sales and earnings caught fire as expected, and the stock has since risen more than 115 percent through a series of record highs.
The company is split into two major divisions: high performance mixed signal products and standard product solutions. Mixed signal circuits are integrated circuits that have both analog and digital circuits on a single chip.
These are typically high-level solutions and NXP meets client needs across eight functional application areas: automotive, identification, mobile, consumer, computing, wireless infrastructure, lighting and industrial. These chips are optimized and manufactured to meet specific performance, cost, size, energy usage and quality requirements of the applications for which they are designed.
Clients will engage NXP in the early stages of development, allowing the company's engineers to fully understand the specific needs of each application. In addition to creating a partnership that helps cement NXP as their provider of choice, this also provides for a seamless extension into any future product updates and modifications.
The company holds the No. 1 or 2 market position in most of the areas in which it competes. It is the leading supplier for automobile radios and keyless entry systems, government identification systems and near-field communications, which is the fastest growing.
NXP's huge patent portfolio is no surprise, as NXP spends more than $550 million per year on research and development, with 3,200 employees in 19 different locations dedicated to improving and creating new technologies.
Shares went public at $14, raising close to $500 million for the private equity consortium that participated in the buyout in 2006 from Phillips. At the time it represented the largest leveraged buyout in history for the semiconductor industry, at more than $8 billion.
These are typically high-level solutions and NXP meets client needs across eight functional application areas: automotive, identification, mobile, consumer, computing, wireless infrastructure, lighting and industrial. These chips are optimized and manufactured to meet specific performance, cost, size, energy usage and quality requirements of the applications for which they are designed.
Clients will engage NXP in the early stages of development, allowing the company's engineers to fully understand the specific needs of each application. In addition to creating a partnership that helps cement NXP as their provider of choice, this also provides for a seamless extension into any future product updates and modifications.
The company holds the No. 1 or 2 market position in most of the areas in which it competes. It is the leading supplier for automobile radios and keyless entry systems, government identification systems and near-field communications, which is the fastest growing.
NXP's huge patent portfolio is no surprise, as NXP spends more than $550 million per year on research and development, with 3,200 employees in 19 different locations dedicated to improving and creating new technologies.
Shares went public at $14, raising close to $500 million for the private equity consortium that participated in the buyout in 2006 from Phillips. At the time it represented the largest leveraged buyout in history for the semiconductor industry, at more than $8 billion.
I still like the prospects of NXP Semiconductor, and continue to recommend it on pullbacks. The purchase of $3,000 worth of the shares in November 2012 would be worth $6,510 now.
The bottom line is that tech stocks are very often mispriced in the early stages of their growth after going public, and this creates great potential for wealth-building by opportunistic investors. Shutterstock, Elli Mae and NXP Semiconductor were all great examples of this phenomenon, and there are more in the market every year if you know where to look.
Best wishes,
Jon Markman
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