Buy Qualcomm (QCOM).  In the current stock market and economy you want to own stocks in the sectors of the market that are outperforming rather than lagging and you want to own companies that can grow even when the economy isn’t. I think cell phone chip-maker Qualcomm fits the bill on both accounts.

First, technology has been one of the strongest sectors this year. Witness the 16% return for the technology-heavy NASDAQ Composite Index in the first six months of 2009 versus the 1.8% gain for the Standard & Poor’s 500 stock index. Qualcomm shares have done even better, climbing 27% from the beginning of the year through June 30.  In a market like this you want to buy relative strength. (The shares have dipped about 10% in the current correction creating a decent buying opportunity.)

Second, Qualcomm has recently raised estimates for the fiscal year that ends in September 2009 and looks likely to outgrow both the U.S. and the global economy over the next 12 to 18 months. With next generation 3G wireless phone systems rolling out around the world, Qualcomm’s handset volume is projected to climb by 10% in the June quarter from that same quarter in 2008. A lot of that growth is coming from the world’s emerging economies—in Brazil, for example, the shift to 3G smart phones is just gaining momentum. Networks built on 3G technology use some flavor of the CDMA standard where Qualcomm’s patent position is strongest. The current market leading GSM standard now controls about 60% of the market so Qualcomm will see its global market share grow as the rollout of 3G technology moves market share toward CDMA.

That should make up for any slowdown in the U.S. market. Thanks to its patents Qualcomm collects a royalty on phones sold by Motorola, LG, Samsung, and other companies. Royalties and license feels make up about 40% of company revenues and come with an operating profit margin of near 90%. The other 60% of the company’s revenue comes from its chip-making business. Most of those chips go into the wireless phone sector but  Qualcomm is also moving into a new business. Its chips, built on the low-energy platform from ARM Holdings (ARMH), are on the march from cell phones to smart phones to net book computers, where they look like a winner against Intel’s (INTC) current generation of low-power Atom chips. That’s a whole new growth business for Qualcomm. The company is set to report earnings on July 22. As of July 15, I’m adding these shares to Jubak’s Picks with a target price of $55 by March 2010. (Full disclosure: I own shares of Qualcomm in my personal portfolio. I will be adding more three days after this note is posted. As is the rule for Jubak’s Picks, I won’t sell my personal position until three days after I’ve posted a sell on this blog.)