Combining Two Top Tech Trends Can Lead to Bigger Profits

Investors are already aware of the top trends likely to produce trillions of dollars in wealth over the next decade. With markets having a classic autumn selloff from overpriced levels, some companies are looking ahead to that future.

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  • The best way to grow for many firms right now is to acquire smaller and faster-growing companies, particularly when those firms provide access to a new market for existing products.

    That may be the case with Qualcomm (QCOM). The wireless chipmaker has partnered up to buy Veoneer, a Swedish-based auto-parts maker. The combination could allow for more advanced safety products on a car, an especially critical tool as many companies are working on self-driving vehicles.

    Qualcomm already dominates with its products appearing in a number of communications devices such as smartphones. This new acquisition gives the company exposure to the fast-growing vehicle market of the 2020s, which could be one of the largest trends today.

    Action to take: Qualcomm has sold off in recent days along with the overall market, and is now 25 percent off its 52-week highs. This is likely a solid entry point for investors, who can also nab a growing dividend payment along with a starting yield of 2.1 percent.

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  • Traders may like January $140 calls. The trade has a few months to play out, and for shares to rebound from the current market weakness. The option last traded for around $2.90, and can likely deliver mid-double-digit gains when the market is done with its current decline. Given the overhang of a potential deal, profitability may be capped, so look for a pop higher in shares to take a quick profit.

     

    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.