What stocks should investors buy ahead of the launch of 5G? What about global telecom stocks that could benefit from a prolonged trade war with China? CNBC's Jim Cramer shared ideas with his viewers this week.
Five Picks For 5G
At the top of the list is Skyworks Solutions Inc (NASDAQ: SWKS), which reported unimpressive first-quarter results Wednesday but highlighted 5G as being a "tremendous catalyst," as its chips are needed to connect devices in the 5G universe.
Coupled with an attractive valuation at less than 12 times 2020 estimates, Skyworks' stock has "a long runway" potential ahead, the CNBC host said.
Cramer's four other picks are:
- Intel Corporation (NASDAQ: INTC) is led by a "very energized" management team, and recent execution issues take a back seat to the "slow-and-steady way to play the 5G buildout."
- Qualcomm, Inc. (NASDAQ: QCOM) will have some form of exposure to "virtually all 5G mobile devices launched in 2019."
- Broadcom Inc (NASDAQ: AVGO) is "far from a pure play" on 5G, but at 10 times next year's earnings estimates, investors could "pull the trigger" if there is a pullback in the stock.
- Xilinx, Inc. (NASDAQ: XLNX) reported one of the "biggest blowouts" this earnings season, as management did a good job in detailing its 5G rollout plan.
Related Link: How To Get In On 5G With This ETF
The China Factor
Finland's Nokia Oyj (NYSE: NOK) and Sweden's Telefonaktiebolaget LM Ericsson (NASDAQ: ERIC) can't compete with their Chinese counterparts on costs, and some clients even say they offer inferior products, Cramer said.
Nokia and Ericsson boast one large advantage over their Chinese rivals in that neither government is "pressuring their companies to spy on their customers," the CNBC host said.
China's Huawei and ZTE are believed to have a tight relationship with Chinese military and intelligence services and use their hardware to spy on the Chinese government's behalf, Cramer said. Needless to say, Huawei and ZTE's inability to win new international deals amid spying allegations represents an opportunity for Nokia and Ericsson despite the latter two companies being "horrific underperformers" for years, he said.
"If you're a telco carrier and you've been warned off of Huawei and ZTE, where are you going to go buy your 5G technology?"
Cramer said he hasn't recommended buying Nokia's stock since 1997, with the company being "steamrollered" by its Chinese rivals. Today, the U.S. government is "doing everything it can" globally to make sure Chinese companies do not win 5G contracts, he said.
It shouldn't be difficult to convince European telecom companies to buy European over Chinese, Cramer said.
"It isn't really all that tough a sell."
Related Link: US Slaps 13 Indictments On Huawei Ahead Of China Trade Negotiations
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