Three plays on the rise of mobiles

published 14 August 2009

Each week, a professional investor tells MoneyWeek where he'd put his money now. This week:Simon Marsh, partner at Killik & Co stockbrokers.

There is good reason to be optimistic. Stress in the financial system has subsided and the banking system the root cause of the crisis is beginning to normalise. Governments have helped by injecting funds on a scale we have never before seen. However, one consequence is likely to be the re-emergence of inflation. We also have to contend with spiralling public debt, and what looks like an increasingly unbalanced economy in China.

One area we expect to do well is technology. The catalyst will be the mobile internet. This threatens to match the impact of the PC in the early 1980s. At the heart of this revolution is Google (Nasdaq: GOOG), which straddles the internet and enjoys unparalleled access to data about consumers. This is of huge value to advertisers. Annual sales of smartphones are expected to reach 500 million by 2012, and the effect on Google's sales will be huge. With other applications planned, Google could well become the new Goliath, and a serious threat to the likes of Microsoft and the incumbent telecom network providers. Given its dominant position and modest rating, Google is a core holding for growth investors.

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Another way to gain exposure to the growth in smartphones is via Imagination Technologies (LSE: IMG). Imagination's strength lies in embedded graphics, used across the smartphone industry and in many other consumer electronics gadgets. The firm is a leader in semiconductor system-on-chip intellectual property, creating and licensing embedded graphics, video, display processors for multimedia and communication applications. Imagination's market-leading video graphics chips (the MBX) and new generation units (the SGX) will be must-have' features in the latest smartphones, including Apple's iPhone. Overall, the group's products deliver higher performance and image quality, yet do so while using less power than all other competing technologies. Given that the market for devices incorporating graphics is forecast to exceed a billion units in 2012, as a global leader in the field, Imagination Technologies is well positioned.

Finally, perhaps the biggest challenge facing humanity is climate change. Together with unrelenting population growth, it means increasing pressure to improve crop yields. That's good news for fertiliser suppliers.

Sociedad de Chile (NYSE: SQM) is one of the world's leading suppliers of potassium-based fertilisers and exports to more than 100 countries. It continues to benefit from increasing demand from China, India, Turkey, Mexico and the Middle East. However, Sociedad de Chile has another ace card it is the world's largest producer (30% market share) of lithium carbonate. This is a key component of the lithium-ion batteries used in a wide variety of everyday devices (including smartphones!). And demand could be transformed by the coming revolution in car production.

Under pressure to produce environmentally friendly and efficient vehicles, the motor industry is turning towards fully electric and hybrid vehicles. Lithium batteries are widely agreed to be the best way to store energy. With almost every car manufacturer working on a hybrid electric vehicle, lithium, and hence Sociedad, is going to be in high demand.

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