Smart Stocks Investing

Qualcomm (QCOM), the newest addition to the Growth Portfolio and a part of our FundFinds Portfolio, is a tech franchise whose business revolves around wireless technology, in particular, CDMA, the heart of the new generation of cell phones. After posting disappointing earnings guidance in January, the company had some good news this week.

The semiconductor company announced that its board authorized the new buyback worth $3 billion. This replaces the $2-billion buyback plan, $1.7 billion worth of shares from which have already been repurchased by the company. In addition, Qualcomm will increase its quarterly dividend by 12 percent to $0.19. Investors, as a result, will be receiving $134.4 million more per year from the company.

Moreover, the company provided a more optimistic business outlook. While back in January, Qualcomm’s CEO, Paul Jacobs, offered a fairly pessimistic view of the company’s prospects for the year, it seems conditions may be improving. Now, the company expects both the revenues and profit for the second quarter to approach the higher end of the earlier forecasts. This seems to indicate that demand for cellphones will be improving in the months ahead, since manufacturing orders for chips come in ahead of orders for other parts.

The market responded strongly, sending the shares higher by almost 10 percent in two days. Qualcomm, which historically trades at a premium to its semiconductor peers because of its large licensing business, is now trading at average valuations, and continues to be a strong recommendation.

One area of the economy that has been relatively recession-proof is long-term health care. That was one reason why we decided to add Health Care REIT (HCN) to our Income Portfolio last November and why we still recommend owning it.

This Ohio-based company, which invests largely in independent living, assisted living and skilled nursing facilities, continuing care retirement communities, hospitals and medical care office buildings, owns roughly 590 properties in 39 states and serves approximately 800 medical office tenants. In other words, it has a widely diversified portfolio, with limited geographic and customer concentration.

Last week the company announced its fourth quarter earnings and full year results that were in line with expectations. Normalized funds from operations ((FFO)) per share came at $0.75, in line with expectations and 9 percent lower than a year ago. For the full year, normalized FFO declined 6 percent and came at $3.13 per share. On a same store basis, revenue growth was 0.9%, and occupancy was up sequentially in four of the company’s five segments. The $328 million in disposition proceeds, together with nearly $1 billion of capital raised, funded the company’s investments and allowed it to reduce debt. Standard & Poor’s upgraded its debt outlook to positive back in December; the shares were added to the S&P 500 Index in January of this year.

Health Care REIT’s announcement last week that it had entered into a $688-million joint venture with Forest City Enterprises marks an important development for the company. As part of the agreement, Health Care REIT will invest $327 million in exchange for a 49-percent stake in a seven-building life sciences campus in University Park, near the MIT. These best-in-class assets in a prime location leased to world class life sciences companies (which include Novartis, Genzyme, Millennium (a subsidiary of Takeda Pharmaceuticals), and Brigham and Women’s Hospital) that further diversify HCN’s health care real estate holdings. This points to a possible expansion in the company’s strategy and we see this development as a positive. Health Care REIT yields more than 6 percent and remains a buy.