7 Under-The-Radar Ways To Play Apple's Supply Chain

At this point, there’s nothing under-the-radar about Apple Inc. AAPL or its bevy of popular devices. Every investor is watching to see how the iPhone X will be received, and Apple’s 35 percent year-to-date surge is a sign that most people are confident it will be yet another success in Cupertino.

But while Apple is one of the most widely owned stocks in the market, many of its international suppliers are virtually unknown to American investors.

HSBC recently initiated coverage of Apple stock with a Buy rating, and analyst Steven Pelayo included the firm’s top seven international Apple supplier stock picks in the note as well.

“Our interest in Apple’s supply chain is not only for insights into Apple, but also to identify related investable opportunities,” he said. (See Pelayo's track record here.)

Here’s a rundown of the full list:

• 1. Samsung Electronics SSNLF may be the only supplier on the list that U.S. investors recognize, and HSBC likes the stock because of its positioning in both hardware and software tied to artificial intelligence and autonomous vehicle technology.
• 2. SK Hynix HXSCL is another top supplier with major exposure to both the AI and connected automobile markets.
• 3. LG Innotek supplies the duel-camera modules for both the iPhone X and iPhone 8 Plus.
• 4. Hon Hai Precision Industry Co., Ltd. HNHPF may be the sole assembler of the iPhone X given its expertise in assembly quality.
• 5. Advanced Semiconductor Engnrng Inc (ADR) ASX gets roughly 20 to 30 percent of its total revenue from Apple and is well-positioned to boost margins and beat 2018 earnings estimates.
• 6. Merry Electronics supplies Apple with speaker and earphone products, and HSBC believes consensus 2018 earnings estimates are 5 percent too low.
• 7. Kinsus Interconnect Technology Corp. supplies printed circuit boards for the iPhone, and HSBC predicts the company will benefit from increasing reliance on flexible PCBs.

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Photo courtesy of Apple.