You always remember your best trades, and if you’re smart (and a little lucky) you might be able to go back to them for more profits later on. Lucky for us, one of my best trades is poised for another big leg up.

Back in late 2011, I was looking for the next game-changing stock. At the time, markets were looking weak and everyone was looking for an Apple alternative or at least a derivative play on the iPhone or mobile service providers. My sights were set much higher, and the subsequent investment I offered to options clients brought a 300% return from December 2011 to March 2012.

That summer, I remember gazing up at a worn array of sagging phone wires strung across two utility poles, then glancing down at my shiny wireless iPhone. It was an almost poetic moment, and one of great inspiration.

#-ad_banner-#​The next industrial revolution is surely underway, albeit mostly hidden. The immense, inefficient web of suspended and buried copper wire is being replaced by underground labyrinths of fiber optics fueling massive wireless networks. Change has already begun, but it still has a long way to go.

Sure, the devices that have inspired this change have been extremely profitable for investors, but the antiquated infrastructure that they operate on needs to be dramatically upgraded. Skyworks Solutions (NASDAQ: SWKS) is a key player in that upgrade, and despite its banner year-to-date performance, shares still offer value for new investors.

For those not familiar with Skyworks Solutions, the company manufactures components (semiconductors, radio transceivers, convertors, among others) used inside many mobile devices and integral parts of the global wireless infrastructure.

While I won’t want to bog you down with the high-tech details of its offerings, it’s important to realize that, at this point, they are necessary to the wireless and mobile markets.

The stock’s strength and momentum was confirmed July 18 with a big earnings beat. SWKS posted revenues of $587 million, up 34.6% year over year. Gross profit was $264.2 million in the second quarter compared with $188.2 million in the year-ago period.

The reality is that this company trades at 18 times 2015 earnings, putting its PEG ratio at just 0.97 if you go with the 19.6% growth expectation from Zacks Research. The way I see it, that 20% growth estimate is way too low. SWKS is expected to deliver a 43% increase in FY2014 earnings and see a 56% jump in adjusted earnings in Q4.

Even with that estimate, at 18 times earnings, the stock is on par with the S&P 500, but has almost 300% more growth than the average company. You don’t have to be a math whiz to see the upside potential; there’s value here.

In addition to positive earnings guidance, the company regularly repurchases shares (almost always a good thing), and offers a forward annual dividend yield of 0.9%, unheard of for most tech companies.

The bottom line is that Skyworks still has plenty of upside at current prices. As more and more investors realize how much this stock has to offer and how integrated the company is on both the device and infrastructure fronts, stock valuations should only increase.

As an added bonus, shares of SWKS tend to do well during late summer to early fall, perhaps due to the schedule of new iPhone releases. I’m looking for at least 10%-15% appreciation in the stock over the next month or so; this should translate to about 46% gains using call options.

SWKS Call Option Trade

Today, I am interested in buying SWKS Nov 45 Calls for a limit price of $8.90.



This call option has a delta of 80, which means it will move roughly $0.80 for every dollar that SWKS moves, but it costs one-sixth the price of the stock.

The trade breaks even at $53.90 ($45 strike price plus $8.90 options premium), which is 3% above current prices.

Our earnings upside goal will be $58, which would equate to a least $13 in options premium, or a 46% return. For our stop-loss, I am willing to let this trade lose about 50% of its premium, since that is roughly our upside.

Recommended Trade Setup:

— Buy SWKS Nov 45 Calls at $8.90 or less
— Set stop-loss at $4
— Set price target at $58 for a potential 46% gain in 3 months

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