QUALCOMM, Inc. (NASDAQ:QCOM) posted fiscal 2Q EPS of $1.06 versus $0.84 for the same period last year on the back of 24% revenue growth. At the same time, Piper Jaffray maintained its overweight rating and put a $74 price target on the stock, suggesting 21% upside. This comes as Jaffray sees upside for the company related to increases in Chinese smartphone adoption.
Qualcomm also pays a solid dividend yield of 2.2%. Qualcomm has robust hedge fund interest, with some 96 hedge funds long the stock. This includes billionaire Ken Fisher of Fisher Asset Management owning the top position, worth some $598 million (check out Fisher’s small-cap picks).
Tire bet
The Goodyear Tire & Rubber Company (NASDAQ:GT) is Tepper’s fifth-largest stock holding, and makes up approximately 4.1% of the fund’s portfolio. The big positive for the stock is the expected rise in global vehicle production, which will drive tire demand higher. I think this could be a good year for the stock.
The Goodyear Tire & Rubber Company (NASDAQ:GT) is also positioned nicely from a cash flow standpoint, having generated more than $1 billion in cash flow from operations last year and now having a $2.3 billion in cash on hand. What’s more is that the company has no debt maturities until 2014.
As far as top-line growth, Goodyear expects full-year tire unit volume to grow at a low single-digit rate in 2013 driven by the 5% growth in original equipment (tires for new cars) demand in North America. The Goodyear Tire & Rubber Company (NASDAQ:GT) has also guided operating income between $1.4 billion and $1.5 billion, a projected 12% year-over-year increase.
Recent industry news also bodes well for Goodyear. Apollo Tyres has agreed to acquire Cooper Tire at a 40% premium to its previous closing price. This deal will give the Indian company access to the U.S. market, which is the second-largest auto market behind China. We take this as another vote of confidence for the expected rebound in the U.S. auto market. Valuation wise, The Goodyear Tire & Rubber Company (NASDAQ:GT) trades on the cheap side, at only about 0.2 times sales compared to Bridgestone at 0.8 times.
Bottom line
Billionaire David Tepper loves the big bank, Citigroup Inc (NYSE:C); I believe the bank can move higher given the compelling valuation. Meanwhile, Tepper’s small-cap pick, United Continental Holdings Inc (NYSE:UAL), is nicely positioned to move higher due to higher travel. The uncertainty surrounding Apple Inc. (NASDAQ:AAPL) leads me to be cautious on the stock.
Qualcomm is a solid investment given the continued demand for 3G devices from emerging economies. I also believe that The Goodyear Tire & Rubber Company (NASDAQ:GT) is a solid investment due to the expected rise in auto sales (see other stocks Tepper is bullish on).
Marshall Hargrave has no position in any stocks mentioned. The Motley Fool owns shares of QUALCOMM, Inc. (NASDAQ:QCOM).
The article Why Billionaire David Tepper Is Banking on Flying originally appeared on Fool.com.
Marshall is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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