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When you think of an "it" product like the iPod or the Wii or the Xbox, and you want to "play" the product in investing, the first thought is to buy the maker, like Apple.

This analysis by Larry Cao and other M* analysts is public, so I'll post it here: 

http://quicktake.morningstar.com/stocknet/san.aspx?id=189027

 The main point is to think of the California gold rush. The people who sold the picks and shovels made the most consistent profits. People saw some lucky prospectors getting filthy rich, and tried their luck at that, but those profits aren't as predictable.

 Good analog designers like Maxim, Analog Devices, Linear Tech, and Texas Instruments have their fingers in the pie. For example, Maxim is involved with digital television (e.g. power-management integrated circuits, white LED drivers). ADI does the gyroscope that goes into the Wii's remote control. LLTC does 3G phone stuff. TXN makes digital signal processors that go into mobile phones, and has an overwhelming lead there.

 There are smaller, one-device manufacturers that have gone bankrupt like small biotechs when companies switch: Portalplayer's stock soared when Apple picked them to make a key iPod component, and then tanked when they switched to Samsung. MXIM, ADI, LLTC and TXN are not like that, they have entrenched positions in the analog industry, and diverse product lines.

 None of these stocks has done so well over the last 3 years. Maxim, especially, is in the $30s from a high in the mid $50s. However, stock price is one thing and value is another. I've picked all of these in CAPS.

Now, another question: which one would I buy with real money? I bought Maxim some time last year, and the stock is worth what I paid for it plus or minus 3%. However, without revealing too much, I was relying on M*'s fair value calculations, and they had TXN about fairly valued then. they recently raised the fair value considerably. If I were buying today, it would be a toss-up between TXN and MXIM based on valuation and growth prospects.

 for SRI investors, LLTC is considered a good guy, environmentally-speaking. MXIM fails Calvert's environment screen, but I'm not sure why, and I've never really found any data. TXN, I believe, passes. If I were buying today, this would give an edge to TXN.

I'm not a super-strict SRI investor, and I will make compromises; for example, I bought Mastercard without knowing about human rights abuses or environmental disasters it was involved in. I'm confident there won't be any, but if it turns bad on that score, I will protest to management, and then I will sell.

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