Thursday, September 24, 2009

Mobile Internet Tsunami

Back on August 11th, Jim Cramer promoted the Mad Money Mobile Internet Index. An index that tracks the upswing in mobile internet devices such as the iPhone from Apple (AAPL) and the Pre from Palm (PALM). Cramer thinks this is a multi-year move similar to PC revolution in the mid 90s and the internet revolution in the late '90s.

On-the-go Web is a trend equal to the mass adoption of the PC, he said, and it will be with us for some time to come. So Cramer today created the Mad Money Mobile Internet Index to track what he expects will be a years-long growth cycle.
The index includes 21 stocks that for the most part don't interest us because most of the networking equipment and semiconductor companies margins tend to get squeezed by the big players such as APPL. Its hard to over thing this play and why not just go with the big boy benefiting from the theme. Index list by sector:

Smartphones
Apple - AAPL
Google - GOOG
Research in Motion - RIMM
Palm - PALM

Telecom Equipment
ADC Telecom - ADCT
Starent Networks - STAR
Cisco Systems - CSCO
Ciena - CIEN
Tellabs - TLAB
Tekelec - TKLC
Commscope - CTV

Handset Components
Qualcomm - QCOM
Broadcom - BRCM
RF Micro Devices - RFMD
Skyworks Solutions - SKWS
ON Semiconductor - ONNN
Cypress Semi - CY
Tessera Tech - TSRA
Sandisk - SNDK
NetLogic - NETL
Xilinx - XLNX


Its a theme that Stone Fox Capital has backed with AAPL being one of the largest positions in the Growth and Hedged Growth portfolios this year. Also, Alvarion (ALVR) is a large position in the Growth portfolio that is highly reliant on the mobile internet theme though Cramer doesn't include it in the index. Guess they aren't has highly tied to the smartphone revolution, but still they are part of the revolution to make internet access mobile.

As far as the stocks, we're not overly familiar with some of the equipment and component companies, but for the most part we don't find the same level of value in these stocks as other sectors that haven't rebounded completely from the crisis. This sector would likely be considered cheap on historical terms, but not cheap for this period. Some of the more intriguing stocks like XLNX and ONNN already have PE multiples for next year in the 15-18 range. The estimates may turn out to be horribly low, but on a relative basis I'm going to just stick with AAPL and ALVR for now. Our portfolios are also heavily invested in Baidu (BIDU) and Riverbed Technology (RVBD) that leaves very little room for more tech exposure.

No comments: