How to Buy Into Xiaomi Without Buying Its Stock

Xiaomi, a five-year-old Beijing-based maker of handsets, is quietly becoming one of the hottest companies in the world. Xiaomi is now the second-largest smartphone company in China by shipment volume, snatching Samsung‘s (SSNLF) No.2 spot as it gobbles up market share wherever it can.

how to buy xiaomi stock before ipo

Source: Xiaomi

With the company’s sights now set on Apple (AAPL), investors might naturally find themselves wondering: How can I buy Xiaomi stock?

Unfortunately, you can’t. While a Xiaomi IPO is eagerly anticipated, CEO Lei Jun declared in 2012 that going public wasn’t in the company’s future for another five years, and with a total of $1.4 billion in funding and a valuation around $46 billion, why rush?

Thankfully, you don’t have to wait for Xiaomi stock to hit the markets to make money off of the world’s most valuable startup. Rather, you can buy stock in Xiaomi’s suppliers and ride them to the moon as they share in the young company’s remarkable growth.

Xiaomi has managed its meteoric growth largely by rejecting large profit margins, undercutting AAPL and Samsung on price and selling online. That means many of its partners are based in China and traded on foreign exchanges.

That said, there are three U.S. stocks trading freely on the NYSE or NASDAQ exchanges you can buy today for exposure to Xiaomi:

Ambarella

Ambarella (AMBA), though primarily known as the company that makes high-definition (HD) video processors for GoPro (GPRO), doesn’t restrict itself to one client. That may be part of the reason AMBA stock is up more than 300% in the last year: it’s diversified and it supplies high-growth markets like action cameras, IP security cams, the automotive industry, and of course, drones.

Shares of AMBA jumped more than 6% on March 2 when news broke that Xiaomi’s new Yi Action Camera, a $64 GoPro-like device, would use an Ambarella A7LS high-performance camera processor.

InvenSense

Although InvenSense (INVN), a specialized semiconductor company making motion-tracking sensors for consumer electronics, should also benefit from Xiaomi’s growing popularity. Apple, Xiaomi and Samsung are all customers, but unlike AMBA, INVN stock hasn’t been able to reap the rewards of those relationships.

The stock took a tumble when Invensense didn’t lock down a contract for the Apple Watch, but that’s in the rearview mirror now. Brian Blair, of Wall Street research firm Rosenblatt, upgraded INVN stock from a “hold” to a “buy” rating in April, boosting his price target from $15 to $20 per share, saying the company was gaining share in Xiaomi phones.

On Monday, Northland Capital also upgraded INVN stock from “market perform” to “outperform,” raising its price target to $18 from $17.50.

Qualcomm

Last but not least, Qualcomm (QCOM) is a generally lower-risk play for those wondering how to invest in Xiaomi before it goes public. That’s because QCOM already owns Xiaomi stock, having been one of the company’s earliest investors.

In late 2011, Qualcomm’s venture capital arm, Qualcomm Ventures, led a $90 million series B round at a reported valuation of $1 billion. Today with Xiaomi’s valuation around $46 billion, that appears to have been a wise investment.

Not only did QCOM see the promise in Xiaomi from the start, it also wets its beak as a chip supplier. The Qualcomm Snapdragon 820 will be featured in some of Xiaomi’s biggest upcoming products, including the Xiaomi Mi5 Plus, a 6-inch version of the Mi5 smartphone.

Trading at just 16 times earnings and paying a 2.8% dividend, the QCOM stock and its $109 billion valuation offer investors both security and exposure to one of the most remarkable young companies in the world.

As of this writing, John Divine was long AMBA Jan 2016 $25 call options and AAPL stock. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.

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