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Best stock investments

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NXP Semiconductor (NXPI) and Visteon (VC) both reported results this week, both pretty much in line with what I would have expected and pretty close to analyst estimates (Visteon earnings were well above estimates, revenue well below because analysts have a hard time getting very specific on Visteon quarters — but their big picture remains about the same).

Visteon’s backlog continues to grow, though that’s clearly very much dependent on auto sales hitting the expectations of auto manufacturers — the backlog represents expected orders for the life of auto models where Visteon’s products are designed in, not guarantees of sales levels. I still think this one is undervalued relative to peers, and has a good grip on some of the automotive electronics cockpit control business in new models, but if auto sales really trend downward substantially they’ll certainly be in trouble.

I don’t own Visteon, but unless you think auto sales will fall precipitously it’s still worth buying in the $70s — though it may take patience, you’d have to be willing to wait and see if their turnaround really turns into solid earnings growth over the next couple years. It will be relatively slow, since car designs are developed slowly and sales trends change slowly, but I still see potential. I first found this appealing at about $73 earlier this year, and my opinion hasn’t changed based on this earnings report. The stock is trading around $69 now.


And NXPI had a “meh” quarter, pretty much matching expectations — though that still represents pretty solid growth on the top and bottom line, thanks in part to the continuing integration of Freescale’s business. It’s not really earnings that are driving this one, though, it was Qualcomm’s (QCOM) widely reported interest in acquiring the company that bumped the shares up above $100 almost exactly a month ago — and it’s the official news that QCOM and NXPI have agreed to the acquisition that will likely control the shares over the next year.

The deal is all cash, for $110 a share, and it requires the approval of both companies as well as regulatory bodies around the world. I don’t see why they would fail to get those approvals, though it’s a tender offer and they do need 95% of NXPI shareholders to tender their shares — so perhaps there’s some chance that shareholders will reject the deal. The …

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