It seems like every six months or so, I turn on financial news television and see hordes of hipsters and students camping out overnight in front of the Apple (Nasdaq: AAPL) store on Fifth Avenue in Manhattan. On Friday, that line of hundreds was waiting to get their nerdy paws on the latest, and indisputably greatest, Apple smartphone ever — the iPhone 5.

The blockbuster telephonic gadget already has booked more than 2 million pre-orders, and that was in the first 24 hours. That metric was double the first-day sales of its previous incarnation, the iPhone 4S. Now, in the interest of full disclosure, I am an owner of Apple shares, and I’m an owner of several iPhones. I also plan to buy the iPhone 5, although I don’t intend on joining the queue of fellow Apple cultist to get it.
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This kind of crazed demand for a product is something that doesn’t come along very often, although Apple is one of the few companies that can create this phenomenon on a regular basis. Now, as traders, we can take advantage of the iPhone 5 frenzy not just by owning Apple shares, although it has been one of the best stocks to own over the past decade. The other way to get the iPhone 5 into our portfolios is to buy the stocks of the key component makers.

Traditionally, Apple doesn’t release the names of the companies that make the components in its products. Thankfully, we have a whole lot of tech geeks out there who consider it their personal mission to dissect and reveal every speck of detail about Apple products. One of my favorite groups doing this work is ifixit, and their recent teardown of the iPhone 5 reveals just what’s inside the hot smartphone.

This teardown revealed that the iPhone 5 is comprised of parts from Qualcomm (Nasdaq: QCOM), Avago Technologies (Nasdaq: AVGO), Cirrus Logic (Nasdaq: CRUS), Skyworks Solutions (Nasdaq: SWKS, STMicroelectronics (NYSE: STM) and TriQuint Semiconductor (Nasdaq: TQNT).
These companies made the Apple cut, and all are likely to see a lot of revenue over the next several years from it. However, not all of these stocks should make your trading portfolio cut. The way I see it, you have to narrow down your iPhone 5 trades to, at most, the three best companies out there, or at least the three stocks ready to pop from their Apple affiliation.

Here are my three favorite ways to play the iPhone frenzy:
1. Qualcomm (Nasdaq: QCOM)
The chipmaker supplies the main ingredient that makes the iPhone 5 work, and as such, it is perhaps the go-to play in the sector if you want to get long Apple without actually buying AAPL shares.

Qualcomm shares are up about 16% year-to-date, but thanks to the added fuel supplied by the iPhone 5, there’s much more room to run higher before we close the books on 2012.

2. Avago Technologies (Nasdaq: AVGO)
This company makes an assortment of digital power amplifiers, two of which are used in the new iPhone. Avago scored a big win here, and that’s likely going to help its stock climb back to, and I think well above, its 52-week high at $39.22.

3. Skyworks Solutions (Nasdaq: SWKS)
This stock tumbled some 18% the day before the iPhone 5 release, as there were fears that its products wouldn’t play a big role in the smartphone’s constitution. Those fears were quelled by the teardown, however, as the company’s GSM power amp, CDMA power amp, and some WiFi components all are present in the new device. Traders rewarded this revelation by bidding the stock up more than 3% in Friday’s trade, but I suspect there’s much more to come.

Action to Take –> Buy QCOM at the market price. Set initial stop-loss at $59.28. Set initial price target at $74.10 for a potential 15% gain in four months.

Buy SWKS at the market price. Set initial stop-loss at $23.02. Set initial price target at $28.79 for a potential 16% gain in four months.

Buy AVGO at the market price. Set initial stop-loss at $32.91. Set initial price target at $41.15 for a potential 15% gain in four months.

This article originally appeared on TradingAuthority.com:
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