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Technology Stocks : Qualcomm Incorporated (QCOM)
QCOM 165.13+1.1%3:59 PM EST
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To: Skeeter Bug who wrote (66219)2/7/2000 11:01:00 PM
From: Stu R  Read Replies (2) of 152472
 
SB:
I do not believe I am "math challenged" but I am having difficulty following your analysis. My first problem is the comparison of a debt investment to an equity investment.
In the case of the tbill investment, assuming interest rates remain the same and it is held 30 years to maturity I believe the value of the investment would be worth exactly what I paid with little chance of loss. My return will be
6.5%/year.
In the case of the equity investment it is not so simple. We don't know exactly how much our company's earnings will grow for how long or how fast. So, a common view of value would be to project anticipated earnings (or cash flow) over a period of time and then discount it to the present with a rate that should be an appropriate measure of risk.
I don't see where you have done this calculation which makes it impossible to make a comparison.

My personal view on why I think QCOM will make a good investment over the next 5-10 years is that I don't think the market has accurately factored in the amount of earnings that will be generated, nor the length of time they will continue to grow. Therefore, I believe the earnings numbers put into the valuation models are too low and the discount rates are too high reflecting more risk than I believe exists for a variety of reasons.

Without some discussion of the valuation factors I have pointed out I am having trouble finding your point logical or persuasive.

Stu
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