Telular and the Smartphone Revolution

If you're looking for a smartphone stock that's not on everyone's radar with a big runup already, look at Telular (WRLS). If you haven't noticed, smartphones are becoming one of the best investing areas, climbing related stocks up through this difficult year, right past the February/March debacle like it didn't even happen. I wrote a post back on July 1 on this mobile internet wave; it includes the traditional laptop and the newer netbook computers. But as the post points out, everything gadgety is migrating onto the smartphone. You will one day be able to wax your truck from your mobile smartphone.

In-Stat did a growth projection back in 2007 where they predicted 30% annual smartphone growth over the next 5 years compared to single digit growth for cell phones in general. You'd think that the brutal recession that came after that prediction would have really messed with it, but Gartner reports that Q2 global smartphone results were up 27% from Q2 '08 ! Can you think of any significant consumer discretionary expense that's up 27% over that time? So it's about the best defensive play; and no telling what it does if we ever get to play offense.

Jim Cramer has put together what he calls a smartphone stock index of 21 prime names. In case you missed it, they are: ADCT, STAR, CIEN, TLAB, TKLC, CTV, QCOM, BRCM, NETL, XLNX, SWKS, RFMD, ONNN, CY, TSRA, SNDK, CSCO, GOOG, RIMM, PALM, APPLE. The trouble with many of these stocks is that they are general tech companies not very levered to just smartphones, and they are high profile. WRLS is low profile but in a position to benefit from the massive move of all our chores onto the 3G wireless platform. They have proprietary technology for what they call M2M (machine-to-machine) connectivity to the airwaves. They call some of their breadbox size products "office in a box" because they let you access fax machines and a wide varity of home or office data from any remote location as long as you have your smartphone handy. No added infrastructure is needed to put all this info into the wireless relm. Verizon and others are deploying Telular's added features in their plans.

The stock has been erratic in the past. The gripe has always been that they have great products but poor results. Well, that has been changing lately. They have turned earnings positive just before the recession and have stayed positive in the face of the downturn logging a current price/cash flow of 6.2, price/sales of 1.1, and PE of 33 and no debt. They have repurchased 23% of their stock since July '08 citing it as a good investment.

Technically, the stock looks like it could be ready to rumble: (click to enlarge charts)


It showed extreme stronghanded ownership over the February/March event and appears to be in launch mode from the two dollar area. The RSI is being pushed over the "normal" limit, which is typically viewed as a bad thing (sell point). But when an unusually strong climb is forming, it can be a good thing (buy point) as, for example, with FUQI:


A transition from normal oscillation to an energetic climb can push oscillator indicators like RSI and Bollinger Bands to sell signals just when you should be buying. How it will work out with WRLS we'll just have to wait and see, but if it is joining the smartphone tsunami, odds are a climb is forming.