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Technology Stocks : Qualcomm Incorporated (QCOM) -- Ignore unavailable to you. Want to Upgrade?

To: waverider who wrote (75926)	7/8/2000 8:19:40 PM
From: kami	Read Replies (1) \| Respond to of 152472

Diamond H.. I checked CBOE options for QCOM. It seems very cheap. For example: wluah 02 Jan 40 call 29 1/2 per contract $40 + 29 1/2= 69 1/2 cost til Jan 2002 or wbial 02 Jan 60 call 21 3/8 per contract $60 + 21 3/8= 81 3/8 cost til Jan 2002 any comment? thanks - Kami

To: waverider who wrote (75926)	7/8/2000 8:43:54 PM
From: Jacob Snyder	Respond to of 152472

re: LEAPs vs. stock: Your math looks correct to me. As you assume larger and larger stock gains, the numbers favor the LEAPs more and more. The problem, of course, is that most theories fail because the assumptions turn out to be wrong. Shit happens. Recessions. Wars. New technologies that change everything. Overleveraged investors/companies/banks/countries get in trouble, and drag everyone down. Politics. If anyone had had the courage to ask the thread, 6 months ago, whether QCOM might be in the 50s today, they would have been laughed off the thread. No one thought this would happen. But it did, and it could happen again. I am not willing to assume a repeat of the late-1999 to early-2000 tech stock runup, of which QCOM was a main beneficiary. I consider that to be a liquidity-driven mania, the Fed pumping money into the system to prevent the Y2K non-disaster. People were throwing money at anything that moved, with no regard for the fundamentals. Momentum guessing was the dominant investing method (and still is, but less so). I prefer to assume that the stock price will go up in proportion to EPS increases (about 40%/Y), and the forward PE will be about 50. My best guess is that QCOM will earn about 3$/share in 2003, so a forward PE of 50 gives them a stock price of 150 in January 2003. Given those assumptions, LEAPs aren't worth the risk. If a recession or a war or something else unexpected happens (and they happen regularly), then the LEAPs could expire worthless, whereas I can just hang on to the stock and wait. Do you think they will make substantially more than 3$/share in 2003? Do you think they will be at a forward PE of substantially more than 50? If so, I'd like to hear the reasoning. I may put some (10-20%) of my QCOM investment into LEAPs (swinging for a home run), and the rest into the stock. It would have to be money I could afford to lose entirely.