I'm back in, as of today, 10% of my portfolio in QCOM at 50. Same-$ limit order buys at 45 and 40 pending. LEAPs below that. I was 40% cash last week, I'm down to 20% cash as of today.
Sentiment on QCOM, and 3G and how much consumers will spend for wireless services, (which is the spring that QCOM drinks from, way downstream), is finally approaching a realistic level. I'm hearing lots of comments, to the effect that 3G is a bust, 3G is another satphone-like Dream, there are no apps, the consumer wants voice and only voice, and even if there was anything the consumer wanted, he has a maxed-out credit card and is starting to worry about losing his job, so maybe that cool gee-whiz next-gen cellphone purchase gets put off till next year...or the year after....or....
When investors get that "sinking" feeling, that "feeling of impending doom", that feeling like the ground they thought was firm is really quicksand, that is when stocks bottom. We may be there, or close to there.
Now, like John Shannon (who has been right for longer than about 98% of SI posters), I'm not at all certain that the coming bottom is THE bottom. That is, I'm sure we will bounce at some point, and I'm guessing/gambling that we are close enough to that bottom to start buying in widely-spaced increments. The hard question for me is, do I sell the following rally? QCOM has held up better than about anything else, only the big cap semi-equips have done better. When we bounce, we will bounce hard. Maybe all the way back to that strong resistance at 65. Do I sell then? Or is it finally, finally, time to start thinking about a LT position? I've been backing and filling for over a year with QCOM. I'm sure everyone who has followed my track record with QCOM thinks I'm a confused ST trader. But, at some point, I will take a position, and then just read the 10-Qs and listen to the CCs, and not sell till I've got a 10-bagger, or a substitution threat, or the Bubble reinflates (yes, this could happen, if the Fed Funds goes to 2% next year).
Smart people are scared. Really, really scared. People who were buying heavily in October 1998, are now 90% cash and firmly resolved to stay there until stocks get chopped in half again, or until the S&P 500 is at a single-digit PE (that's using trailing earnings, of course). That sentiment makes me bullish. But current valuations make me bearish. Even at 50, QCOM's PE, using TTM EPS, is almost 50. Maybe the PE using forward 12M earnings is a bit better. And maybe it isn't.
And those PEs don't count the writeoffs of failed investments that QCOM has made and will inevitably continue to make. Putting $ into speculative startups, to try and grow the area where CDMA is used, or try and push the technology adoption speed, these things are a fundamental part of QCOM's business plan. And it is a recurring, permanent part of the plan. And, inevitably, some of that money (a lot of it in this macro environment) fades away and permanently disappears. That is in the nature of speculative venture-capital money. As we have seen, and continue to see. So, excluding the writeoffs from the earnings used to calculate valuation, well, I think it is dishonest. |
