Under-the-Radar Tech Stock Poised for a Double-Digit Rally

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The semiconductor industry has been around since the 1960s and has grown to be a nearly $300 billion global business. Basically, semiconductors control the flow of electricity by forming the basis of integrated circuits, transistors, solid state electronics and solar cells, among many other functions. In other words, semiconductors form the base of our modern electronic-driven society. 

Over the years, investors have made trillions of dollars investing in this sector. Most everyone is familiar with the major semiconductor companies like Intel (INTC), Micron Technology (MU) and Texas Instruments (TXN). 

However, there are dozens of smaller companies that don't have the market share of the top names, but are masters of their particular niches. My stock scanning recently discovered one of these under-the-radar semiconductor companies that is setting up to be a great investment.

The company is Skyworks Solutions (SWKS). This Massachusetts-based semiconductor company was founded in 1962. It provides products for the GPS, broadband, cellular infrastructure, smartphone and tablet markets, among other applications.  

Skyworks has a $4.65 billion market cap, an EPS growth rate of 15% over the past three years, and a forward price-to-earnings (P/E) under 10. The company sells primarily to the Asia-Pacific region, with only 6% of sales in the United States.  It beat estimates for its fiscal third quarter, ended June 28, with $436 million in revenue, up 12% from the same quarter last year. Gross margins came in at 43% with expectations of 44%-44.5% for the next quarter. Net income was just under $66 million, which is more than 33% over the same period last year. The company also ramped up its R&D spending, which is key for the future of any tech company. 

What I like best about this company is its key relationships with both Samsung and Apple (AAPL). Skyworks supplies chips for the iPad, iPhone and iPad mini, as well as for Samsung's Galaxy S4 handset.   

In addition, the company is innovative and seeking to benefit from the future "Internet of Things." This next wave in technology is projected to create 50 billion connected devices by 2020. Skyworks is correctly positioned to capitalize on this next revolution.  

Taking a look at the technical picture, SWKS is setting up to be an ideal breakout buy candidate. There is strong triple-bottom support at the $21 level, and resistance exists at $25. Buying on a daily close above $25 makes ideal technical sense. 

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SWKS Chart

The combination of fundamental growth and breakout potential makes a powerful case for this stock. The diversification and positioning of this company to profit from future trends, as well as its current business, make SWKS a compelling investment.

Recommended Trade Setup:

-- Buy SWKS on a daily close above $25
-- Set stop-loss at $23
-- Set initial price target at $33 for a potential 32% gain in six months

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