Brian Colello: Skyworks Solutions (SWKS) was the best-performing stock in Morningstar's coverage universe, up 155% in 2014. Much of this rise is well deserved as they are well exposed to emerging trends in technology.
The company makes radio frequency chips used to filter and amplify signals in smartphones. So, two of the strong trends we saw in 2014 were rapid smartphone adoption as they displace basic handsets worldwide, and then more importantly, the adoption of LTE networks as these 4G networks require more complex RF content and higher dollar-priced content for Skyworks.
The other tailwind came from Skyworks' customer base. They are a key supplier to Apple (AAPL), which is doing very well selling the iPhone. So, they have good exposure there. They are also well diversified across all the other smartphone makers, including the Chinese handset makers. So, they weren't hit very hard by Samsung's troubles.
Finally, outside of phones, Skyworks appears well exposed to the Internet of Things by selling wireless-connectivity products into any type of device that needs to connect with a wireless network.
We view Skyworks as a bit overvalued today. We have some concern about competition. We have concern about the pricing of these products as LTE matures over time, and we are a little less bullish on the Internet of Things as it stands today. But that said, Skyworks has executed extremely well in 2014. It's one of the best-performing semiconductor stocks that we cover.