Year End Plans: Now let's look at SWKS

Now let’s look at Skyworks

Skyworks is my second biggest position, but it’s NOT a forever-high-conviction stock, like BOFI. It’s a semiconductor company, so, almost by definition, it can fall out of favor. But for now it’s doing great. I didn’t buy such a large position, but it has grown into its position size. I took a position in this company when it was recommended by MF One (or Pro, I can’t remember), back in August of this year. I took the majority of my position at $52, added about $57, then it fell back to $46 when some other semiconductor company announced bad earnings. SWKS responded to this by pre-announcing increased estimates, and the price has gone straight up from there, now at $74.50. My initial position is up 43%. I stopped adding at $62.75 but haven’t sold any.

This is a company in the Internet of Things world, and it has incredibly accelerated in the past five quarters or so. Here’s what their revenues have looked like the past nine quarters

2012: xxx xxx 421 454
2013: 425 436 477 505
2014: 481 587 718

As you can see, at first they were going up $50 million year over year, but the last two quarters they increased by $150 million and then $240 million! In fact the last two quarters they were up SEQUENTIALLY by $100 million and $130 million!!! (That helps to explain why I haven’t sold any). Adjusted earnings over the same quarters have been

2012: xx xx 54 55
2013: 48 54 64 67
2014: 62 83 112

While earnings always grew year over year, you see the same kind of acceleration in the past two quarters here too. It’s remarkable!

Here are trailing earnings from June of 2013 to Sept 2014:


Thus current training earnings of $3.24 are up 46.6% from $2.21 a year ago. The PE is 74.5/3.24 = 23

At the end of the December quarter, as you can see from the table of earnings, earnings of 117 for the quarter, up 50 cents from the year before, is conservative. That would give training earnings of 3.74 and a PE of 19.9. They’ll likely even do a little better.

Here’s a condensation of the original recommendation, and perhaps from some other posts:

Skyworks Solutions makes technology that powers wireless connectivity in everything from Apple and Samsung smartphones and tablets, Medtronic medical devices, to Google and General Electric products. Dubbed the “Internet of Things,” the world is starting to connect billions of new objects to the Internet, and Skyworks is uniquely positioned to benefit. Not only does it serve all of the top-tier mobile computing device makers, but Skyworks is also diversified across industries to serve more than 2,000 customers.

The company sells more than 2,500 high-performance analog semiconductors and related products (supported by nearly 1,000 patents), including amplifiers, attenuators, receivers, switches, diodes, modulators, GPS power and voltage regulators, and more. They’re often sold together into a phone or any connected device. Skyworks earns industry-beating operating margins of 30.5% selling specialized solutions to giant customers with growing connectivity needs.

“We’ve spent the last decade investing significant resources and leveraging our technology to expand our presence in traditional analog markets like automotive, medical and industrial. We have established significant traction in these higher-margin growth avenues, and we see tremendous opportunity ahead.”

Whatever device is being connected to the Internet, the smaller, more complex, and more efficient the technology needs to be, the more it benefits Skyworks. Not only that, but the more data flowing through networks, and the more connection nodes needed, the more Skyworks products are needed: “Complexity for us drives profitability, and there are fewer and fewer people in the space that can do it.” Given this, Skyworks expects profit margins to continue to move higher. It is helped in this regard by having its own manufacturing facilities for many differentiated products, and contracting the rest.

Following the company’s most recent earnings report, the CEO said, “Skyworks is entering a new and exciting growth phase driven by global wireless proliferation and the Internet of Things. Quite simply, we are capitalizing on the macro trend to connect virtually everyone and everything, all the time.”

We seek financially strong companies with growing market opportunities and proven management. We want to see strong growth in free cash flow as revenue grows. That’s particularly true (and rare) with semiconductor companies, which too often grow revenue but struggle to balloon profits at the same time. Here, Skyworks stands out. Finally, the balance sheet is strong, with $893 million in cash and no debt.

In the July conference call, management spoke of hitting $5 per share in earnings before long, as revenue grows and margins float higher.
Yet this is all short term. It’s the long term that interests us. Skyworks plans to continue to expand its portfolio, is investing in sensors, and wants to add to its Internet of Things portfolio, perhaps with acquisitions. The company foresees “sustainable above-market growth” as far forward as it can look, and leans conservative with its long-term guidance of annualized industry growth rates in the mid-teens. Its gains in market share partly come at the expense of single-component manufacturers, who are getting squeezed by increasing complexity that asks for full, or modular, and specialized solutions like Skyworks provides.

Skyworks’ CFO said in July, “We take a very long-term strategic view of our business, and we think we’re positioned extremely well. I don’t think we’ve ever been positioned as well as we are today for the long term.” We make this investment with solely the long term in mind, too. If management continues to execute, demand should flourish, and it’s plausible our investment at least doubles in five or six years.

So much of revenue came from Apple that it has been good to see the business steadily diversify into what it calls “broad market” opportunities (medical, auto, industrial, etc). It still has a long way to go to not rely on mobile for much of its revenue, but lately its broad market revenue is growing as quickly as mobile, and that’s very good. Meanwhile, its position in mobile is very strong, too, of course, and we’ll take that, too.

But it wants to be a stable company with very diverse revenue streams to smooth out the bumps that are typical in more concentrated chip companies.

I like SWKS better than SWIR and INVN (two other “Internet of Things” stocks, broadly speaking) partly because it has much stronger financials already, and is expecting expanding margins (somewhat of a rarity in the chip world) and has very strong free cash flow and a reasonable valuation. I think it’s on more solid ground than younger competitors with much lower revenue and little income to speak of. It also has a long customer list for its analog products that should keep letting it roll into IOT business with them more easily.

Back to my notes:

Oct 2014 - Raised estimates
In response to the warning by a fellow chip maker that tanked the chip market, Skyworks just raised their 4th quarter estimates from $1.00 to $1.08. Analyst estimates were $1.01. And I’m sure, if they raised to $1.08, they expect to beat it.

Last year they made 67 cents. So $1.08 would be up 61%. Earnings will be in a range of $3.50 for the year, up 50% for the year, and with a price of $45 yesterday, that’s a PE of about 13. Now, that’s my kind of stock.

Nov 2014 – Announced Sept quarter results

Revenue of $718 million, up 51% yoy and 22% sequentially
Adj Operating Margin up to 32.8%, and up 81%
Adj Earnings $1.12
Dividend increased by 18% to 13 cents
Outlook for Revenue $770M, Adj Earnings $1.18 next quarter.

Outlook for next quarter
Fiscal 2014 was a record year for Skyworks as we exceeded key metrics in each and every quarter and crossed the $2 billion revenue threshold. We are now scaling to more than a $3 billion revenue run-rate with annualized non-GAAP earnings per share approaching $5.00. Specifically, for next quarter, we anticipate revenue to be up 52% year-over-year to $770 million with further margin expansion yielding $1.18 of adjusted earnings.

Doing great!

Nov 2014 – Announced a $300 million stock buyback (They have $800 million in cash that they can use).

To sum up, I’m holding this one for a long ride, but I will keep a close watch on it.





Skyworks is up 50.1815 percent and climbing in profits since October 15th as a kewl Swing Trader per my sweet Cheat Sheets.

Will bail as soon as the xover occurs.

SWIR up 95.5492 percent. crossing the fingers a for a kewl one bagger. Ditto on the xover.

In the mean time, still hanging on to your VERY coat tails. Just don’t zig and zag to much ;o)

Best regards and let’s have a Happy New Year.

Quillnpenn -

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That is impressive Saul but with semiconductor companies it just takes one quarter to come back to earth. I think it may not go higher from here. And if it falls to around $60, it should be time to add.


Skyworks rises on D.A. Davidson target hike • 10:12 AM
Eric Jhonsa, SA News Editor

Citing strong industry demand trends and a belief RF component makers are “poised for record results” in Q4 (and possibly Q1), D.A. Davidson has hiked its Skyworks (SWKS +1.7%) by $10 to $85, while reiterating a Buy.

The target hike comes two days after Needham downgraded Skyworks and several other chipmakers, while generally citing valuation. Rosenblatt argued last week Skyworks should benefit from rising 4G phone demand, given its higher power amplifier share within the market.

Previous: Avago upbeat about Q4/Q1 mobile RF component demand

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Bought 500 shares of SWKS (75% of my entire portfolio) on monday at $72.07 after the drop (post 4897), come Friday morning I’m grabbing another 155 shares to be all in for my modest portfolio.

You all may call me reckless but I’m positive this is going to work.

Thank you Saul and friends for all the great knowledge given about many really good companies, especially SWKS. Happy New Year everyone!


This is a bad idea. If you do well on this you are still wrong, if you it goes poorly you really wrong.



I hope it works out for you. But statistically it won’t.

But putting all your eggs in one basket, buying and selling them in a serial fashion almost guarantees that you will take a big hit someday.

Your method is like going to Vegas, it may be fun, you may have some big winners but in the end you will probably lose. Which is fine if you are young enough and don’t need the money.


Sweetadeline -

I’m with the others who have weighed in: this is a mistake.

If you were quite young and only had a small amount to invest (such that you couldn’t meaningfully diversify because of trading costs), then something like this might make a little sense until you could raise more cash and diversify over time.

The obvious problems include – how will you know when to sell? what is your temperament if SWKS starts to go down, then down more? what if your thesis is just wrong? why put substantially all your eggs in any single basket?

Since is clear from your share numbers that you have at least $50,000 to invest, you should not put yourself in this position, period. Diversification is incredibly important and you have the ability to do so with your size of portfolio. My belief is that there is data showing that owning even 10-12 carefully-selected companies can get you nearly all the benefits of diversification (i.e. you don’t need to own 20 or 30 or 100 companies). Owning 10-12 companies means you are taking large positions in a relatively small basket of companies. Why not read more on this board and other boards, join Stock Advisor for $99/year if you haven’t already, and pick at least 10 companies and buy $5,000 or so in each and hold for the long term, adding new cash to existing positions and new companies as you get more cash to invest?

Stay sweet!

(Long SWKS and about 30 other companies)


Hi Sweetadeline,
While that is something I personally wouldn’t do, rather than say that I think it’s a mistake, I’ll ask what your goal is for the position?

Is the goal to make some quick money and take it off the table and hold the rest of the position? Or is this the one company you decided to let your portfolio ride on long term?

At what point (% gain or loss) would you sell? Do you have a target price and a stop loss in mind?

Is it possible you may need some of the money in the near term and be forced to sell out at a bad time?

Most stocks don’t move by more than 2% per day without some significant news, and on most days even less. Yes, we have seen a 50% gain in SWKS since Oct, and at $50k basis, that would be 25k profit if we see the same run over the next few months.
However, it is just as likely that a bad earnings surprise or an analyst downgrade could take out 10+% of the stock price (like SYNA today)… or that market conditions could change and IOT stocks could fall out of favor (like 3D printing last year), or something worse like 2008 could happen. Then you are looking at a $5k or more loss.
Do you have a plan for how you would handle that?

There is an Elon Musk quote, “It’s ok to have all your eggs in one basket so long as you control what happens to the basket.”
The unfortunate thing about the market is that you can’t control the basket… only what eggs and how many of them you put in it.

For the record, I think SWKS is a great company and I have shares… in fact I wish I started with a bigger position, but right now I’m more inclined to let what I have grow than adding more.

I’ll add one more idea that may not be popular with the board, but may be helpful for you. You could think about a core portfolio of a dozen or so companies you have conviction in to buy and hold, and then use a separate chunk of capital in your portfolio to trade around them if you like. I do that myself, and I’ll honestly say the results are probably about the same when I net out the winners and losers as if I just allocated the capital to my long term positions right now, but it’s an experiment I’ve been working on lately. It’s just learning to get better at it and I’m not letting it change my core investing.

I’m also going to suggest a book. It’s an easy read and there are some really good lessons in there -…

You can certainly make your own decisions, and if you decide to go all in, I hope it works out. It’s just not an amount of risk I would take.



I’m positive this is going to work.

I can’t think of a more fundamental investing mistake than being positive. If there is no room for doubt it means there is no room for balanced consideration.

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SWKS conference call. They were almost euphoric about how things are going. I think this captures it.

However, in general these analog architectures are getting much more complex and that’s across our entire customer base in mobile and non mobile. But in terms of our largest customers this provides a tailwind for us. We have consistently more addressable content with each successive design. And in fact we continue to look out two to three years as we become more of a system producer or engaging very early in architectural selection. So we have very good visibility in terms of how the architectures are going. And so I guess I would say our clearly stated goal has been for a long time is to gain content with each model and as an incumbent we have been very successful in maintaining and in fact growing our footprint and that’s aided of course by complexity that all of our customers need help in solving particularly on the analog side and that’s our strength.

What that says to me is that once they get in with a customer, they are in for life, because they become an integral part of a very complex system, and replacing them for for a competitor who is marginally cheaper would be very expensive and questionable. They see margins gradually rising instead of falling.

Great choice for my second biggest position.



I got this from a post on the Skyworks board:

Skyworks price target raised to $92 from $70 at Ascendiant.
Ascendiant raised its price target for Skyworks to $92 citing the company’s better than expected results and guidance.

Skyworks price target raised to $90 from $72 at Topeka.
Topeka increased its price target on Skyworks after the company reported stronger than expected Q1 results. The firm expects the company’s margins to increase over the next several quarters.

Skyworks price target raised to $90 from $78 at Canaccord
Canaccord raised its price target on Skyworks to $90 from $78 following the company’s Q1 report, citing its strong guidance, solid iPhone 6 sales, and growing traction in its non-handset broad markets business.

Skyworks price target raised to $92 from $70 at Brean Capital
Brean Capital raised its price target on Skyworks to $92 from $70 following the company’s better than expected results and guidance. The firm sees growth in the LTE market in China, coupled with its less seasonal Broad Markets business, driving the upside guidance.

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Here are some additional excerpts from the Q&A part of the call.

if you look at our product portfolio within Smartphones, there aren’t very many Smartphones, and there are no Smartphone manufacturers where we don’t have a position. And in fact there aren’t very many Smartphone platforms in the world today where we don’t have something… It isn’t like you have 30% PA share or whatever, that’s not the case. We are participating with virtually everybody and on every base band platform.

And here’s how they compete:

Let’s suppose we engage with not a full op, but a SkyLiTE, a kind of a light version of our SkyOne product for regional phone. Then of course we’re competing to try to capture the receive side, we are trying to capture the antenna switching and tuning, we are trying to capture both WiFi bands, if there is more than one. And so we’re…making the argument that it’s easier for you to engage with Skyworks as a customer for the complete solution: Fewer moving parts, you let us handle more of the complexity, we can help you solve the overall analog system solution…

So there really isn’t anyone who can compete currently, no one who can come up with the complete solutions as well as they can. So once they get all, or almost all of a complete solution, they are consulting with the manufacturers on products two or three years out, and no one can break in.

This is an amazing opportunity. And they grew revenue 60% and EPS by 88%… and they have a PE of about 22 (!)




For these reasons, my #1 position

Best investing to all