Q: I heard that American Airlines’ parent, AMR, reported a profit. Should I invest in it?
A: Airlines are a notoriously difficult industry, featuring challenges such as fare wars, volatile fuel prices, labor issues, weather complications, costly empty seats and more. AMR is currently in bankruptcy protection.
Day-trading may seem like a good way to make money, but it’s really gambling, not investing — and often just as effective as buying Powerball tickets.
A study by the North American Securities Administrators Association suggested that only about 12 percent of day-traders might trade profitably, and that some 70 percent “will almost certainly lose everything they invest.”
Dear Fool: When I was a 1952 engineering grad, I was dealing with an Omaha developer. I just had to have a newly restyled 1953 Studebaker and he thought the new model would turn the ailing company around.
I bought the car and he bought the stock.
Over the next few years, I watched his $7,000 investment shrink as he watched me try to get my lemon auto fixed. I had a loser auto, he had a loser stock.
The Fool responds: Companies with good products can still struggle and sometimes lose. And those with bad products can hang on for a while.
Ideally, seek companies with great products, strong competitive positions and positive growth trends.
In the early 1950s, Studebaker was struggling with high costs, quality problems and price wars between Ford and General Motors.
It ended up merging with Packard, but struggles continued.
If you want to profit from the growth of smartphones and related technologies, take a look at Qualcomm (Nasdaq: QCOM).
Its technology is found in iPhones and many other devices, and while some worry about a possible slowdown in iPhone sales, there’s much more to Qualcomm, including plenty of sales to other device-makers.
For starters, it’s in strong financial shape, with 2012 revenue surging by 28 percent over year-earlier levels to $19 billion and net income growing by 43 percent.
A leader in smartphone processors, Qualcomm has more than $26 billion in cash and investments.
Considering how much it put into research and development in 2012 (about $3.9 billion), that’s a pretty good stockpile.
The company also just launched its most powerful version of Snapdragon processors, which will be in smartphones and tablets later this year.
So between current mobile processors and future mobile processors, Qualcomm has much more going on in the mobile industry than just iPhone components.
Qualcomm has one more thing that investors need to consider: its valuable patents. With thousands of CDMA (Code Division Multiple Access) patents, Qualcomm earns 3 to 5 percent off every CDMA-enabled mobile device sold. Last year, its licensing revenue grew by 16 percent.