Mike, JGoren, and others regarding GSTRF and QCOM, I tend to agree with JGoren that the appreciation potential of GSTRF in the short run may be much greater, but so is the risk. GSTRF is different from QUALCOMM. From its inception, QCOM had a cash flow generated by the OMNITRACS products, which helped to provide the cash needed to finish developing CDMA. G* has nothing to generate revenue until it launches enough satellites to begin service. They just launched four more last week, so they are on schedule to begin service sometime this fall. Furthermore, G* is heavily leveraged as a result of its junk bonds, and it may become even more leveraged if it needs to issue more bonds or convertible preferred shares in order to meet its continuing expenses.
In short, the stock is VERY risky compared to QCOM. The junk bonds, however, in my view, are quite safe, inasmuch as the 2 principal shareholders (Loral and QUALCOMM) very likely don't want any default, leading to a bankruptcy filing. One thing going for the stock is some significant insider buying. Assuming the subsequent satellite launches are successful, and assuming service can start sometime this fall, it is not clear to me that there will be any profits for at least two or three years. That would negatively affect my willingness to buy shares now, but many other investors in technology areas don't seem to mind not having any profits. Just look at the action in AMZN and other internet related stocks. |
