RF Micro Devices (NASDAQ: RFMD ) , an RF component supplier to the smartphone industry, has made investors in the company happy this year. The stock has risen roughly 135% year to date, and an extremely positive earnings report along with a few other catalysts could mean further gains in the future. However, there are still plenty of risks facing RF Micro, and any one of these could stop the stock's rise in its tracks.
Losing a big customer
During fiscal 2014, 25% of RF Micro's total revenue was derived from Samsung, by far the largest seller of smartphones worldwide. In second place was Apple, through contract manufacturers, at 20% of total revenue. No other customer accounted for more than 10% of RF Micro revenue for the year.
With 45% of revenue coming from Samsung and Apple, RF Micro could face serious problems if it lost business from either company. Given RF Micro's recent strong results and guidance, along with teardowns of the new iPhones, there doesn't appear to be anything to worry about in the near term, with both RF Micro and merger partner TriQuint well represented in the iPhone 6. However, there's no guarantee that RF Micro will keep this business in subsequent years, and that poses a huge risk to the company.
Apple reportedly sold 10 million iPhones during the weekend launch of the iPhone 6 and iPhone 6 Plus, beating the 9 million mark the previous generation of iPhones set. That's great news for RF Micro, as it suggests that sales of iPhones aren't going to stop growing anytime soon. However, depending so heavily on the iPhone could be a disaster waiting to happen for the company.
The falling price of smartphones
Much like how the average price of PCs has been continually declining over the past decade, the average price of smartphones is declining as well. IDC estimates that smartphone average selling prices will decline from $314 in 2014 to $267 in 2018, with large declines in the cost of Android and Windows Phones leading the way.
The combination of falling prices and slowing unit growth, which is already occurring in mature markets, will make it more difficult for component suppliers to turn a significant profit. In the PC industry, there are really only two companies that are able to consistently generate above-average profits -- Microsoft and Intel. These companies are able to do so because their products are, for the most part, irreplaceable. The enormous ecosystem around Windows makes the OS extremely difficult to displace, and Intel's manufacturing and R&D advantage over AMD guarantees a dominant market share.
RF Micro's products are replaceable, given all of the competition, and as the price of smartphones gets driven down, manufacturers will be looking to cut component costs as much as possible. The double-digit operating margins that RF Micro managed in its most recent quarter may not be sustainable in the long term, and that could ultimately hurt the stock price.
Competition from Qualcomm
RF Micro has plenty of competition, from Skyworks Solutions to Qualcomm, the leading apps processor provider. Last year, Qualcomm entered the RF front-end market with the RF360, a product that put it in direct competition with RF Micro. While Qualcomm's entry into the market hasn't had much of an effect so far, Qualcomm's vast R&D and resource advantages should be sources of worry for RF Micro.
RF Micro's merger will TriQuint will help it be more competitive, but the specter of Qualcomm may be too much to overcome in the long run. RF Micro has a spotty record of profitability over the past decade, with large swings year to year, and while the most recent quarter was a good one for the company, competition could prevent RF Micro from becoming consistently profitable. That could be bad news for the stock price.
Final thoughts
RF Micro, both the stock and the company, has been performing well as of late, but there are significant risks that could reverse this trend. Overdependence on a small number of customers, the commoditization of smartphones, and competition from Qualcomm could all put a damper on profitability and the stock price in the long term. Investors should be aware of these risks before considering an investment in RF Micro.
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Alamy When you speak about money with individual investors every day for years, you learn a lot about how people make their decisions. You see why they're investing and what their goals are. You see different strategies and methods to investing. And you see many costly mistakes that can add up significantly when the play out and repeat over time. Some of these mistakes are the result of simply not knowing the right things to do. However, many are the results of not taking an active interest in investing. So much money is lost when people assume things will simply take care of themselves. Here are the six costliest mistakes that individuals -- also known as retail investors -- make, and some ways you can counteract them. 1. Ignoring Investment Accounts Likely one of the costliest mistakes is simply ignoring your investment account for years, even decades. This can result in a number of problems: Losing entire holdings. Not rebalancing to stay in line with current risk tolerance. Having accounts eaten away by fees. I have seen investors lose tens of thousands of dollars because they ignored their accounts. The solution: Schedule times at set intervals to check in on your accounts. It needn't be often; quarterly, every six months or even annually will suffice. You can even choose an online broker that will allow you to set up reminders for yourself or merely mark it on your calendar. 2. Not Paying Attention to Fees The most frustrating mistake I saw investors make was not paying attention to fees. When overlooked, these fees add up to a significant drain on your portfolio. The two most common are from trading too often and from mutual funds themselves. Trading too often can be hard to counteract, especially if you consider yourself an active trader, but keep in mind those commission fees add up. The big fee that far too many overlook is the mutual fund fee. According to a paper by two University of Pennsylvania Law School professors, the average mutual fund fee (as of 2013) is 1.31 percent and can vary anywhere from .05 percent to more than 2 percent. If you're investing in a mutual fund that charges that average, you'll lose roughly $1,500 of a $10,000 investment over 10 years. The solution: The large majority of these fees can be avoided by seeking exchange-traded funds that charge considerably less in fees. 3. Improperly Diversifying Diversification, when done right, is a hallmark of wise investing. However, many retail investors believe they're doing it correctly when they're actually over-diversifying and thus exposing themselves to more risk. The problem goes back to mutual funds. Few investors realize that a relatively small number of popular stocks form the core of many mutual funds, albeit in different allocations. So, while attempting to diversify, many investors end up highly concentrated in that pool of stocks. Other problems arise when you pick a number of stocks to invest in and believe that makes you diversified. That is unfortunately not the case, as many times the stocks you pick will fall in the same few industries. These decisions leave you less prepared to weather a market downturn and put you at risk for increased loss. The solution: Review each fund's top holdings to avoid duplication, and consider a variety of industries when you buy individual stocks. 4. Being an Emotional Investor We often hear about the perils of being an emotional investor. While it may make sense to follow the herd when you're investing in stocks, it'll generally only come back to harm you in the long run. Other signs of being an emotional investor: Holding on to a stock, thinking it'll come back at some point. Selling a stock at the first sign of a loss. Being glued to the financial news cycle. Emotions cost you when it comes to money. Many investors who held out of the market over the past few years lost out significantly as a result. More often than not, they held out due to fear. The solution: Stay the course and be rational -- your portfolio will thank you for it. 5. Not Investing Early Enough I've been guilty of this myself. Many people think that either they can't afford to invest, have too little to invest for it to mean anything or can postpone investing. Whatever the excuse, the result is a lost opportunity to grow your money. The solution: Find a way to start investing in your 20s, or earlier, even if it's in small amounts. If you have only a small amount to start investing with, many brokerages have either no minimum deposit or require as little as $250 to get started. Start with what you can and set a goal to put aside more each month. It might seem like nothing, but the point is to getting the discipline down. 6. Ignoring Taxes I spoke with investors daily who were unaware there were taxable consequences to dividends or gains made through sale of investments. Whether we like it or not, the Internal Revenue Service wants its share -- and this can add up to hundreds of thousands of dollars when not watched. The solution: Take advantage of tax savings available through vehicles like an individual retirement account. If you like getting dividends or trading, do so in an IRA to shelter yourself as much as you can. This also means knowing what not to hold in an IRA account, like tax-free investments like municipal bonds. Of course, this should be done in consultation with your tax adviser. More from John Schmoll
Charlene Ingram, a single mother of four, has $125,000 in student loan debt. NEW YORK (CNNMoney) Occupy Wall Street has been on a debt-abolishing tear lately -- recently buying nearly $4 million in student loans from debt collectors and then forgiving it. 
Sen. Warren cites CNNMoney story in hearing 
Image Source/Getty Images MIAMI -- The man who masterminded an $800 million insurance scam that fleeced tens of thousands of investors in one of Florida's all-time largest fraud schemes was sentenced Friday to 20 years in prison. U.S. District Judge Robert Scola gave Joel Steinger, 64, credit for pleading guilty to avoid a lengthy and costly trial and said Steinger's multiple medical problems -- he appeared in court in a wheelchair, with an oxygen tank -- argued against the maximum 50-year sentence sought by prosecutors. But Scola said Steinger still deserved a lengthy prison term because, as chief executive of now-defunct Mutual Benefits Corp., he orchestrated a fraud scheme that victimized more than 30,000 investors in all 50 states and numerous foreign countries between 1994 and 2004. "My understanding is that most of the time, on the major decisions, it was you making the decisions," Scola said. "It's clear that you were the mastermind of the criminal enterprise." The Books Were Cooked in This Ponzi Scheme The company, first investigated in 2003 by the state Office of Insurance Regulation, bought life insurance policies from people with AIDS, cancer and other chronic illnesses and sold them to investors. The policyholder would get paid an upfront, discounted amount and the investor was promised a larger insurance payout when the person died. The company promised safety and sky-high returns. But Steinger and others involved in the scam admitted that life expectancy numbers were cooked, the company's financial strength was falsified and eventually older investors were being paid with money from newer ones in classic Ponzi scheme fashion. Mutual Benefits was shut down by the Securities and Exchange Commission in 2004. Assistant U.S. Attorney Karen Rochlin argued for the longest possible sentence, comparing Steinger to convicted Ponzi schemers Bernard Madoff and Scott Rothstein, the former South Florida attorney who is serving a 50-year sentence for running a $1.2 billion scam involving investments in fake legal settlements. "There should be no others like him ever again," Rochlin said of Steinger. 'It Eats My Guts Out,' Steinger Says From his wheelchair, Steinger delivered a rambling 40-minute monologue repeating his many health issues and apologizing for hurting investors and his own employees. "It eats my guts out that this turned into a criminal enterprise, that people got hurt," he said. "Nobody intended this to end up the way it did, least of all me." Steinger is the last of 13 defendants convicted in the case, including his brother, Steven Steiner, who is serving 15 years behind bars. The brothers spell their last names differently. Part of Friday's hearing concerned Steinger's 2007 assistance to the FBI in an offshoot case involving Dr. Alan Mendelsohn, a Fort Lauderdale eye doctor who was seeking campaign contributions to wield influence among state leaders in Tallahassee. Steinger wore a recording device in conversations in which Mendelsohn falsely claimed he had enough clout to make criminal investigations into Steinger's business disappear. Mendelsohn eventually pleaded guilty in a federal corruption case and was sentenced to four years in prison. Steinger got little credit in his own sentencing for his cooperation because, as Rochlin put it, he only turned to the FBI about Mendelsohn when investigators were closing in on his own fraud scheme and he didn't help them uncover the truth behind Mutual Benefits. "It was too little, too late," she said. 
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