My thoughts regard the slide in QCOM and the Buffet comparisons.
QCOM is doing what the market is doing. There is a high correlation of about 50%. Currently, the earnings have not shown any spikes to represent the future growth. So, much of the market doesn't differentiate QCOM from other wireless stocks or the recession priced into the market.
Someone on the thread pointed out the Greenspan watches the leading indicator index. It did just cross zero and Greenspan did not change the interest rates.
The slide in QCOM has been in line with the leading indicator index. That is, the economy is in a recession since maybe March 2000 after interest rates were boosted as a millennium fix. The leading indicator index has been below zero for over a year that I know of.
I think QCOM is not recession proof as evident by the last 18 month stock performance. Many hoped it was because of the need to talk and the relatively low cost of a phone.
QCOM may lead some tech stocks out of this recession by posting an earnings spike. Economy is recovering, jobless rates are reducing, 1x being promoted, all frontiers adopting CDMA. This will differentiate QCOM as a wireless stock with in a few quarters.
The slide in the market will stop it's negative influence as soon as the Enron jitters in the accounting stops spoofing the market. I think the accounting profession is more honorable than the market is giving them credit. With the Enron reaction and the first quarter of scrutinizing, this should pass soon.
QCOM's management has always been conservative in accounting practices. Three points support this. The seven year spread of licensing revenue. The low ball earnings estimates. The conservative charges on the books for currently failing assets like Globestar and others.
In light on the Enron CEO's honesty. I think the integrity of the QCOM management is the highest. I watched the earning reports of Nokia and others. I am always impressed by the conservatism and integrity in there business reports. Just the management practice of beating product offering dates consistently is an excellent example. How many company's hype with product offerings. I think this is QCOM's greatest strength beyond the intellectual property and R&D capabilities.
I quit my day job and joined the Peace Corps and served in Latvia. In fall 1999, I was riding a train to the beach in a poor country watching students chat on a mobile phones. I never saw so much use of mobile phones and so different than the USA. I saw TV shows from Finland where every student had a mobile phone on there desk. Here were poor students in poor countries using mobile phones more than Americans.
I think the potential global growth is so underestimated by many Americans because of the existing American infrastructure. Mobile phones are more essential to quality of life and status outside the USA. For QCOM, except for Korea, these markets are just being taped.
So, after riding this train, I took my cash balance for my retirements and 401K's and invested it in all in QCOM. Maybe a gamble like the Enron employees with there retirement money. But it was a long term buy based on growth, R&D, and production quality, and management. Not many investment opportunities have all these qualities. Qcom is no Enron. It is still true. The situation hasn't changed. Only the market and the economy has changed.
As far as Buffet's philosophy and the numbers. This focus is on the past and a linear growth. It is totally unrepresentative of future growth due to the stages of product development and introduction. 1x and the video products are just being developed with little promotion and no integration. The future growth numbers are guesses. Introduction of new products will spurt. Individual country growth will spurt. Problems will occur. But eventually, the dramatic growth will show up on the balance sheet.Then, people will look back in 2006 and say this is a Buffet stock.
I got in at average of about 73 and am still holding. I will be back to a day job in March. I like the prospects really well now. There will be a small cheer when it crosses 73 again. Thanks to both threads for keeping me on track.
Ken |
