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

To: sag who wrote (116102)	3/27/2002 8:16:51 PM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 152472

hi sag, a few comments on your figures... and we discount those future earnings at a rate of 5.00% i believe 5% discount rate is exceedingly low. why have a lower discount rate on a stock than the yield available on government bonds? also, your calculations consider gross earnings only and not EPS. EPS will differ from gross earnings due to, i believe, ongoing share dilution from options issuance. subtract the long-term debt for QCOM ($0), and divide by the outstanding shares (767 million) to get a per share intrinsic value of $62.75 you see, it is in this step, where you use today's outstanding shares as the divisor for tomorrow's earnings. i believe you will get a different calculation if you assume 3% ongoing increase in share count. not to mention raising the discount rate a bit. Perhaps something more realistic? If we assume initial earnings of $790 million grow at a rate of 25.00% as i mentioned before, Buffett says only a handfull of S&P cos will grow at even 15% for a decade, let alone 25%. i believe people may be underestimating just how phenomenal 25% for a decade would be. it is a little ironic since QCOM's earnings have been flat for 2 years (the known past), and yet people assume it is "more realistic" that future earnings (the unknown future) will grow at an amazing 25% for a DECADE, as opposed to a measly 15% for the decade, which Buffett is on the record as saying will be an exceedingly rare occurence for S&P500 companies. bold prediction: NO S&P500 COMPANY WITH CURRENT NORMALIZED EARNINGS OVER $750 MILLION WILL COMPOUND THEIR EARNINGS AT 25% ANNUALLY OVER THE NEXT DECADE. personally, i would consider it impressive if QCOM achieves geometric CAGR of 12% over the next decade. my guess is that will be in the top 5% of all S&P500 companies. all JMHO and i could be completely wrong.

To: sag who wrote (116102)	3/28/2002 10:02:01 AM
From: carranza2	Read Replies (2) \| Respond to of 152472

It is of course useful to argue long-term projections in deciding whether an investment is worthwhile. However, to compare a stock to long term Treasury bonds, and then make an investment decision based only on that set of considerations, is to ignore the larger picture. Anyone who invests in stocks such as Q is not(or should not) be thinking exclusively in terms of whether it will outperform long term Treasury bonds. The investment decision, at least in my case, is one in which a substantial amount of speculative reasoning preceded the bet. I use the gambling term purposefully. Any alert investor knows that Q can and has delivered spectacular returns. Moreover, factors are in place which could lead to significant returns in the future. A sophisticated investor also knows that the risk that the stock will not deliver long terms returns exceeding Treasury yields is substantial. He presumably has made the investment in order to potentially capitalize on his assumption that high returns are likely. Thus, the Treasury yield comparison is relevant but only to the extent it is a measure of an investor's tolerance for risk. A more conservative investor could easily be convinced to go elsewhere based on the comparions made by Mucho and others while a more aggressive one will not be dissuaded because he is convinced his calculations could lead to higher than market returns. The comparisons are merely tools. It all comes down to one's investment style. And in matters of taste and style, there are no disputes.