Investors are currently going over their strategies for the next year and evaluating the performance of their picks during 2012. The year has been a good one for stocks, and most of the markets have shown considerable gains. The Dow Jones Industrial Average is up 7% this year. The S&P 500 Index has posted returns of 13% while the NASDAQ is up 15% for the year. The trend is expected to continue during the next year as a majority of experts believe 2013 will be a good year for equities. It is expected that the global economy will start to recover during the coming year, and investors will start pouring in.
It is important to pick the right stocks for the portfolio to take advantage of the better performance expected of the equities markets. We have decided to choose four companies based on strong growth prospects and solid performance. We believe these companies will prove to be winners during 2013. We have tried to pick a diverse set of companies in order to achieve some diversification in the portfolio. I will explain one-by-one why these companies will be winners in the next year.
Qualcomm (QCOM), semiconductors manufacturer for mobile phones had a brilliant year. The company has a dazzling combination of semiconductor manufacturing and licensing business. The best thing about the company is the segment it caters to. At the moment, the smartphones market is experiencing a boom, which allows the company to achieve phenomenal growth.
During 2012, the company reported record revenue of $19.1 billion. Although Intel Corp (INTC) remains the biggest revenue generator in the industry; rapidly growing smartphones market gives Qualcomm a lot of room to grow revenue. On the other hand, Intel is facing the problem of the slowing PCs market.
It is extremely important for any growing company to have enough cash to fund its future growth. At the moment, the company has free cash flows of $4.7 billion. Despite capital expenditures of over $1 billion; the firm is able to generate solid free cash flows. CAPEX to free cash flows ratio stands at above 4 for the company.
All of the margins are in double digits for the company. Operating margin of 29.7% is almost double the industry average of 15%, and net margin of 32% is almost five times more than the industry average of 5.7%. In addition, three-year average revenue and EPS growth of 22.4% and 47.7% respectively, make it an extremely attractive pick.
The most important factor, however, is the future growth. Qualcomm is the exclusive supplier for Apple (AAPL) and benefits heavily from rising iPhone and iPad sales. Analysts believe iPad and iPhone sales will be much higher during 2013. In addition, smartphone shipments increased by 47% year-over-year during the past quarter. There is a massive growth opportunity for Qualcomm in its respective markets, and I believe the company will grab the opportunity.