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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: lrrp who wrote (26411)	6/16/2000 2:20:00 AM
From: Jacob Snyder	Read Replies (1) \| Respond to of 54805

re: fair price for qcom : Interesting that I should get such a question now. I spent much of today looking at 3 (very different) stocks: CMH (mobile-home builder, longterm EPS growth rate 15-20%, stock now at a PE of 7), AFFX (potential gene-chip gorilla), and QCOM. I bought CMH, and am closely watching the other two. For QCOM, consensus estimates for the next 12 months EPS is 1.33. Growth rate 40%. 1.33 X 40 =fair value of 53. We've given back all the liquidity-and-momentum-driven buy-growth-at-any-price tech move that began last Fall. So the stock is beginning to look interesting to me. But the above equation isn't that useful. After all, we aren't buying the stock because of what it will do in the next 12 months. We're buying it because we think it will own the data wireless equipment market, which will not be a mass market till.............2003?? There is still a lot of time between now and then. So, how sure are we that QCOM will own its niche the way MSFT and INTC own theirs? I can justify owning MSFT, based on 12-month forward earnings that I'm sure will happen, even if the company is broken in two. My forward PE times growth rate equation is only useful to the extent that I can accurately predict future earnings. I don't think I can do that for QCOM with as much assurance as I can for MSFT or WCOM or CMH. Given the fact that the stock was at 8 in January 1999, 200 in January 2000, and 61 now, other investors are having just as hard a time as I am, deciding the future prospects of QCOM. Perhaps the way to do it would be to buy a few out-of-the-money 2003 LEAPs in QCOM, every month for the next 6 months. Or maybe waiting till the day after Globalstar goes belly-up.