Investing Club: What we're watching Thursday afternoon — including why we like Qualcomm's deal with Veoneer

Published Thu, Mar 24 20221:53 PM EDTUpdated Thu, Mar 24 20224:38 PM EDT

Deal news: Veoneer (VNE) said this morning that the deal to sell itself to Qualcomm (QCOM) and SSW Partners will close on April 1. We like this deal for Qualcomm for a few reasons. Adding Veoneer's Arriver software business, which will transfer shortly after the deal closes, to Qualcomm's automotive business will provide it with additional ADAS (Advanced driver-assistance systems) technology to build out and scale its Snapdragon Ride solution. The deal has diversification benefits too. Qualcomm's price-to-earnings multiple of 13 times forward earnings means it trades more like a handset company. We argue that there is much more to the company. The handset business is great, but the growth opportunities in auto, internet of things (IoT), and even VR handsets are significant. As these different growth drivers gain focus, we think QCOM re-rates with a higher multiple. You can now add Linde (LIN) to the list of companies suspending operations in Russia. The company said it is "working with the relevant governments and authorities to ensure the company fully complies with international sanctions and is safely winding down affected projects in Russia. In addition, Linde has suspended all business development for new projects in Russia." Update on Cisco (CSCO): this stock has been a bit of a dog lately and a disappointment for reasons that are beyond us. We think the stock acts worse than how the company is doing. Sure, the supply chain remains the biggest question mark on margins, but demand is still very strong, and we continue to believe this will be a huge year for enterprise spending. Go back to what the company said last quarter: Product orders were up 33% year-over-year, representing the third straight quarter of 30% or higher growth. Additionally, the product backlog at the end of the quarter was more than $14 billion, representing an increase of more than 150% over the previous year. The demand is there. And as we wait for the supply-chain issues to play out, we'll happily collect the 2.8% dividend. We aren't rushing out to buy shares today because, as we have stated before, we are waiting to see if it takes out our $53.91 cost basis. This patience has paid off. But if the stock comes in another dollar or two we may buy. Eli Lilly (LLY) said this morning that the FDA did not approve the Biologics License Application (BLA) for sintilimab in combination with pemetrexed and platinum chemotherapy for the first-line treatment of people with nonsquamous non-small cell lung cancer. Analysts at Morgan Stanley called the news "expected and immaterial" in a research note. Apple (AAPL) is working on a subscription service for the iPhone and other hardware products, according to a Bloomberg report this afternoon. (Jim Cramer's Charitable Trust is long AAPL, CSCO, LIN, LLY, QCOM. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Qualcomm president and CEO Cristiano Amon speaks at a news conference during CES 2022 in Las Vegas, Nevada, U.S. January 4, 2022.

Steve Marcus | Reuters

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