Bid Talk Gets Me Excited About ARM Holdings plc

Recent speculation surrounding ARM Holdings plc (LON: ARM) has made me want to buy it

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

sdf

Nothing gets a share price moving like bid speculation.

Indeed, ARM (LSE: ARM) (NASDAQ: ARMH.US) has been the topic of bid talk recently, with rumours swirling that Intel could be a potential suitor for the leading microchip designer.

Of course, rumours of an Intel acquisition have been rife for much of 2013, but ARM’s shares still reacted strongly to the speculation, now being within sight of their all-time high of 1,097p.

So, with the Intel/ARM story potentially having more mileage in in yet, I’m thinking about adding ARM to my portfolio.

Moreover, bid talk aside, there are three clear reasons why I think ARM is an attractive investment.

Firstly, the quality of ARM’s products is quite astonishing.

The company does not merely manufacture its own products, rather it is at the forefront of design. Not only does this equate to a stronger focus on ensuring the end product is highly innovative, it also means that ARM can divert all of its resources towards the sole aim of developing ideas and designs that are ground-breaking and for which there is very high demand.

Indeed, high quality, innovative products lead to high margins that are sustainable, making ARM a highly profitable business.

Secondly, because ARM is focused on intellectual property, it enjoys substantial barriers to entry in the form of patents. Such barriers to entry provide ARM with even higher margins than it would normally experience.

Moreover, unlike pharmaceutical companies that have to worry about their products going off-patent, by the time a patent expires in ARM’s line of work, technology has often moved on so much that the expiry is not as important. This means that ARM will not necessarily be exposed to ‘patent cliffs’ that can be an issue with other sectors.

Thirdly, ARM’s growth prospects are highly impressive. Earnings are forecast to grow by 40% this year and 23% next year, with only a small number of stocks being able to offer equally attractive growth rates.

Although these figures are estimates, ARM does tend to deliver on the growth front and is able to offer a degree of consistency in terms of year-on-year growth that other technology companies struggle to achieve.

So, ARM impresses me a great deal because of the persistent bid talk, high barriers to entry, the quality of its products and the excellent growth rate in earnings that are currently expected by the market. Indeed, ARM is one of my favoured growth stocks.


Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter does not own shares in ARM.

More on Investing Articles

Businessman using pen drawing line for increasing arrow from 2024 to 2025
Investing Articles

After the FTSE 100 broke 9,000 points, does the UK market look overvalued?

The FTSE 100 went past 9,000 points this week but Mark Hartley says there are still bargains out there and…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

Nvidia stock hit an all-time high this week. But could it be a bargain, even now?

After the Nvidia stock hit an all-time high this week, might it still be an attractive opportunity for our writer's…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

As the FTSE 100 hits an all-time high, I’m following Warren Buffett’s advice!

Billionaire investor Warren Buffett is a font of stock market wisdom. Our writer reflects on his approach, as the FTSE…

Read more »

One English pound placed on a graph to represent an economic down turn
Investing Articles

The FTSE 100 reached an all-time high this week. Is it too late to invest?

The FTSE 100 hit a new all-time high level over the past few days. Our writer explains why he thinks…

Read more »

Close-up image depicting a woman in her 70s taking British bank notes from her colourful leather wallet.
Investing Articles

Here’s how £9,000 in savings could be used to target £343 a month of passive income

Christopher Ruane sets out a passive income plan that he reckons could help someone make sizeable sums over time without…

Read more »

ISA Individual Savings Account
Investing Articles

How to build a Stocks and Shares ISA with a 6% dividend yield

It’s easy to build an investment portfolio with a high dividend yield today. But investors need to manage risk carefully,…

Read more »

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Investing Articles

How risky is switching from cash savings to a Stocks and Shares ISA?

The UK government is making moves to encourage cash savers to consider investing via Stocks and Shares ISAs. But what…

Read more »

Friends and sisters exploring the outdoors together in Cornwall. They are standing with their arms around each other at the coast.
Investing Articles

4,985 shares of this FTSE dividend star pay an income equal to the State Pension!

Zaven Boyrazian calculates how many shares investors would have to buy to generate enough income to match the UK State…

Read more »