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Wednesday, August 22, 2012

How To Profit From Three "Backdoor Investments" Riding Apple

Dear Sleuther,

"Your decision, if it goes Apple's way, could change the way competition works in this country," said a Samsung attorney to Federal Jurors in San Jose, California, during his closing arguments yesterday.

Apple and Samsung, which control more than half of worldwide smartphone sales, have been in a three week patent dispute for industry supremacy, and the jury is set to deliberate later today.

They'll figure out which Apple patents, if any at all, Samsung infringed upon when it created devices that compete with the iPhone and iPad.

Not only is Apple asking for $2.5 billion in damages from Samsung, but Samsung is seeking $422 million in a countersuit against Apple.

Each wants dominance in a smartphone market that's valued at, according to Bloomberg Industries, $219.1 billion.

It's been suggested that Apple wants to permanently bar Samsung, the largest maker of Android smartphones, from selling products in the United States that violate its patents.

But courtroom cases aren't just happening in the United States...

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This could go down in history as he story of our era.

This trial is only one of many between the two companies on the exact same issues. For example, lawsuits have been filed in Tokyo, Seoul, Germany, Paris, Milan, Australia, and the U.K.

If Apple prevails, the case would give Apple major firing power against Samsung and other rivals, compelling them with stronger incentive to diversify their designs and avoid further legal battles.

All of this is in accordance the late Steve Jobs's intention, which as he told his biographer, was to go "thermonuclear" on Android for copying Apple's designs.
All this comes at an interesting time. Apple is preparing to release the iPhone 5... and if this court case falls in Apple's favor, it could tremendously boost sales of U.S. history's already most valuable company.

It means a lot because, last fiscal year, while the iPod's share shrunk to 6.9 percent of its revenue, the iPhone and iPad accounted for more than 60 percent of its revenue.
If all goes well for Apple, then all will go well for its partners. Here's how to profit from three "backdoor" investments riding the company's next big wave.

"Backdoor Investment" #1: ZAGG, Inc. (NASDAQ:ZAGG)

Among other interesting tidbits that were revealed from the recent trial is that most iPhones aren't nude.

According to an internal consumer survey by Apple presented as evidence during the trial, 78 percent of iPhone users cover their phones with cases.

Zigg designs and manufactures accessories for the smartphone market, and to the best of my knowledge, they're the biggest player for making covers in the U.S. Nobody is in a better position to profit from cover sales when the iPhone 5 debuts.

Zigg also has products for the tablet market as well, which supplement the iPad. After partnering with Logitech (LOGI), they're doing keyboard cases and selling co-branded iPad keyboard cases throughout the Apple Stores.

Since their U.S. patent for protecting electronics with film has a good foothold, their hottest product, the InvisibleShield screen protector, sells to both Apple and Android products, which can be found at any Big Box retailer. It also owns iFrogz, a big case and accessory seller.

"Backdoor Investment" #2: Skullcandy, Inc. (NASDAQ:SKUL)

Like Zigg, Skullcandy sells other smart phone accessories, such as audio branded headphones.

The market for ear buds and headphones is driven by the sale of smartphones--like the iPhone (now with capabilities of an iPod)--which is one of the fastest growing markets of the 21st century.

The last three years revenues were $118 million, $160.5 million, $232.4 million, and projected revenues for 2012 are $280 million... which has consistently beaten consensus estimates since they've been public.

Earnings were $1.00 per share in 2011, and are projected between $1.15 and $1.20 a share in 2012, and around $1.43 in 2013.

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"Backdoor Investment" #3: Cirrus Logic, Inc (NASDAQ:CRUS)

Cirrus provides the sophisticated audio technology that goes into Apple's iPhone's, like the amplification, echo cancellation, and noise suppression attributes.

Apple is responsible for about 70% of Cirrus Logic's revenue, so the upcoming iPhone 5 sales should give Cirrus a huge boost in business, which has happened consistently with such debuts over the past five years.

Cirrus is forecasting sequential revenue growth of 70% to 90%.

The Best Part: Cirrus Logic has no real competition.

Sincerely,
Josh Grasmick
Editor, Agora Financial
P.S. These three recommendations just scratch the surface of the "backdoor" investment opportunities available to you. To find a more in-depth analysis of ways to win big profits, click here.

How To Profit From Three "Backdoor Investments" Riding Apple is featured at Penny Sleuth.

Questions or comments? Drop us a line at editor@pennysleuth.com.

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