Skip to main content
Message Font: Serif | Sans-Serif
 
No. of Recommendations: 1
Hi,
I perused the QCOM board for an answer to this question, and there was too much "Q rox 'da house!!" noise to find a believable answer. So I post the question here:

Can anyone point to any substantive reasons that QCOM's stock price has gone on a seemingly limitless rise over the past couple of months? I know that, about a year ago, they settled their patent dispute over CDMA, thus starting their meteorite rocket-ride. Still, over the past month, there have been a large number of +10, +20, +30 days strung together.

I don't own any QCOM (still kicking myself for not buying at the "too expensive" price of $160), but I'd like to understand what the hell is going on in this industry that is justify such wild moonshots.

I woudln't be surprised if this question has been discussed before, so if you could point me to GOOD explanations of recent events, that'd be great.

Thanks much,
David
Print the post Back To Top
No. of Recommendations: 4
<I woudln't be surprised if this question has been discussed before, so if you could point me to GOOD explanations of recent events, that'd be great.>

Very Easy to explain David,

It is what is coined on Wall Street as "Tulip Mania".
Wall Street at times pushes a stock to the level where it is a "must own" for every portfolio and Mutual Fund. One can not go to a party and say that they don't have it in their portfolio , otherwise they will be laughed out of town. From what I have been able to find out the QCOM'ers are expecting $5 a share in earnings in the near future which would give it a PE of about 70. Thats the justification for owning it. I hope they are right for everyone and their mother is in it, and it is a hell of way down from HERE!!!! I wish them all good luck and hope it continues its good ride, but I have seen this type of run up many times before. I even remember EDS old Ross Perots stock have the same run in the 1970's if you can believe that. I think it went from $15 to $300 and then crashed down to $20 again. Nothing is safe when everyone wants to play. The danger is when there are no more buyers and just sellers. God forbid if QCOM makes a mistake, it will be a total bloodbath. Now you QCOM Culters, I am not against you at all and hope you go to $1000 and split 10 to 1, I am just stating a fact from history and Physics that Gravity eventually catches up with all stocks,especially those trading at 250 times earnings.

MYCROFT
Print the post Back To Top
No. of Recommendations: 0
<I woudln't be surprised if this question has been discussed before, so if you could point me to GOOD explanations of recent events, that'd be great.>

Very Easy to explain David,

It is what is coined on Wall Street as "Tulip Mania".
Wall Street at times pushes a stock to the level where it is a "must own" for every portfolio and Mutual Fund. One can not go to a party and say that they don't have it in their portfolio , otherwise they will be laughed out of town. From what I have been able to find out the QCOM'ers are expecting $5 a share in earnings in the near future which would give it a PE of about 70. Thats the justification for owning it. I hope they are right for everyone and their mother is in it, and it is a hell of way down from HERE!!!! I wish them all good luck and hope it continues its good ride, but I have seen this type of run up many times before. I even remember EDS old Ross Perots stock have the same run in the 1970's if you can believe that. I think it went from $15 to $300 and then crashed down to $20 again. Nothing is safe when everyone wants to play. The danger is when there are no more buyers and just sellers. God forbid if QCOM makes a mistake, it will be a total bloodbath. Now you QCOM Culters, I am not against you at all and hope you go to $1000 and split 10 to 1, I am just stating a fact from history and Physics that Gravity eventually catches up with all stocks,especially those trading at 250 times earnings.


So the only question remaining is if we have the guts to short QCOM !!!!!

Anyone know what the short interest is ? Anyone have a link to check recent short interest ?
Print the post Back To Top
No. of Recommendations: 0
So the only question remaining is if we have the guts to short QCOM !!!!!

Anyone know what the short interest is ? Anyone have a link to check recent short interest ?
...markr

Shorting qcom is not gutsy. It's guessing. And it seems that you will not find much company on that side.

It would kind of like be like jumping off a building and expecting that the laws of gravity might be in your favor this time.

http://biz.yahoo.com/p/q/qcom.html

Ok, so there are 14mil shares short. But look at the ratio of shares short and start comparing it with other stocks that you think are too high.

Arrow
Print the post Back To Top
No. of Recommendations: 0
arrow:

>http://biz.yahoo.com/p/q/qcom.html

>Ok, so there are 14mil shares short. But look at the ratio of shares short and start comparing it with other stocks that you think are too high.

Sorry for the dumb question but from that link how do you find the short number?

Thanks a lot,
BF
Print the post Back To Top
No. of Recommendations: 8
(Sorry if this posts twice, the boards are being weird)

There's no question that much of QCOM's stock rise is a result of the current market environment where momentum players hop on a stock that's going up and magnify the effect. However, here are the underlying fundamentals which I believe are supporting the move:

1) The outlook for the industry as a whole. Wall Street has discovered wireless. The growth potential for this industry is outstanding, and all of the quality companies have seen their stock price rise.

2) A good earnings report, coupled with the announcement by management that they will be selling the handset division which, as it turns out, is a major drag on earnings. A bear case can be made from this piece of news, as some would say that the inability of QCOM to compete effectively on handsets does not bode well for their future prospects in other highly competitive areas (i.e. ASIC's). It's true that QCOM can expect to do well licensing their patents but, as Tero has pointed out, no company has yet managed to survive as a viable business based on IPR alone. The claim of QCOM management is that the handset business (as well as the money losing infrastructure business which they sold to Ericsson earlier this year) was merely intended to develop critical mass for their technology, and was never strategic for them.

3) Generally bullish comments by QCOM management. For the past few months QCOM management has sounded downright cocky. To all appearances they believe that they have prevailed in the standards battle. Their credibility is enhanced by the fact that many of their competitors have claimed for years that QCOM's technology does not work. Now that QCOM's earlier claims for the technology have been proven, and now that one of their main competitors has actually capitulated and licensed QCOM's technology, Wall Street is inclined to believe what management tells them. One factor which most tend to overlook is that QCOM is locked in a struggle for control of the future of wireless. Everything management says is at least partly intended to garner support for the CDMA standard. While I believe QCOM's management to be honest and forthright, I also know that part of their job is to do PR work in support of CDMA, so their utterances should perhaps not be accepted as uncritically as Wall Street seems to be doing these days.

4) Reviews are still coming in, but QCOM demonstrated their HDR (High Data Rate) technology this week. This is intended to support the speeds needed for wireless internet and data transfer functions. It appears that the technology is much farther along than was suspected (watch out Metricom?). It was this latest development that drove most of this week's move.

I must say that the latest stock price rise for QCOM leaves me in a bit of a quandary. When I bought this stock a year ago, I believed that there was tremendous upside potential, and my downside risk was fairly limited. While I still believe that there is an excellent chance that this business will be worth much,much more 5-10 years from now, I must be much more concerned with the downside now. There is no way I would be a buyer at this price. OTOH, I bought the stake I wanted to have back then and I am reluctant to sell any now and forego any of the potential long term gains I saw when I got into this stock. I'm not complaining, but things would be much easier if this thing would just rise slowly and inexorably over the years instead of taking this rocket ship ride. But then, I'm always happier when my stocks are cheap. I don't have to think as much. <g>
Print the post Back To Top
No. of Recommendations: 1
"Their credibility is
enhanced by the fact that many of their competitors have claimed for years that QCOM's technology does not work.
Now that QCOM's earlier claims for the technology have been proven, and now that one of their main competitors has
actually capitulated and licensed QCOM's technology, Wall Street is inclined to believe what management tells them"

Friends of mine involved claim that Motorola and Lucent made CDMA work for wireless, because QCOM alone couldn't. I know that QCOM have a huge bunch of power control patents in CDMA, mainly because most of the early ones will not work. Anyone else has opinions on this?

If you did not know, power control is the crucial part of CDMA. In TDMA/GSM, the resource is timeslots. In CDMA, Power is the main resource, even more important than codes.

I agree very much with Mycrofts post in this area. Very dangerous company...
Print the post Back To Top
No. of Recommendations: 0
< I must say that the latest stock price rise for QCOM leaves me in a bit of a quandary. When I bought this stock a year ago, I believed that there was tremendous upside potential, and my downside risk was fairly limited. While I still believe that there is an excellent chance that this business will be worth much,much more 5-10 years from now, I must be much more concerned with the downside now. There is no way I would be a buyer at this price. OTOH, I bought the stake I wanted to have back then and I am reluctant to sell any now and forego any of the potential long term gains I saw when I got into this stock. I'm not complaining, but things would be much easier if this thing would just rise slowly and inexorably over the years instead of taking this rocket ship ride. But then, I'm always happier when my stocks are cheap. I don't have to think as much. <g>>

Dear Mark,

I have a solution to your problem that my great uncle taught me about holding great companies. He told me that when a stock splits to sell the split shares and to never sell the originals. He used that system for some 50 years with great success. I have the same problem that you have with Nokia and Lucent. I will never sell my original stake but will sell the split shares that I receive from now on as I have done with my other holdings, I treat them as a massive dividend. I find this system to be the best of all worlds as it allows me to pay my bills and still beat the S&P 500 every year. Your summary of QCOM was wonderful and your cautioning of new investors to wait is admirable, you are a gentleman sir!!!! But how can you not be with such a great Roman Name (I am a Roman Scholar and am very jealous).

Best of Luck to you and Congratulations on QCOM,

MYCROFT
Print the post Back To Top
No. of Recommendations: 1
MarkMarcellus: It's true that QCOM can expect to do well licensing their patents but, as Tero has pointed out, no company has yet managed to survive as a viable business based on IPR alone.

I would think that a longtime stockholder would know about ARM Holdings (ARMHY).

You might do some research into their business model, it is enlightening.

Pax.
Print the post Back To Top
No. of Recommendations: 0
I would think that a longtime stockholder would know about ARM Holdings (ARMHY).

You might do some research into their business model, it is enlightening.


Pax, I don't think Tero was saying that IPR can't be a cornerstone of a company's business model, and I'm certainly not saying that. However, the company needs to have an operational component to support that IPR through products, services, etc. This certainly appears to be true at ARM. Any company which is unsuccessful in that portion of the business will probably be unable to maintain their IPR advantage for long.

Agreed that ARM's business model appears to be of the type that QCOM aspires to.

Print the post Back To Top
No. of Recommendations: 2
I have a solution to your problem that my great uncle taught me about holding great companies. He told me that when a stock splits to sell the split shares and to never sell the originals.

That's not a bad rule. It eliminates the emotional component and will tend to get you out near the highs. My problem is that I NEVER want to sell my companies if the fundamentals I bought them for are still in place. I believe that when you do that, you are diluting your long term returns, unless you can come up with a reliable buyback rule that will get you back in at an equal or lower price.

When I buy a stock, I'm trying to judge the potential returns over a 10 year or longer period. I also tend to invest all I want to in the company at that point, and I tend not to add to a position unless there's a severe market correction. This is because I believe that the more decisions I have to make, the more likely I am to make an error. If I sell off some of my QCOM, I have to decide where else to put the money. I will quite likely be selling off one of my best investment decisions in order to put my money in an inferior one. I could leave it in cash, but I'm already over 40% invested in cash and bonds, and that number is much higher if you look at the cost basis (which is the way I tend to look at it).

If I owned Coke and it shot up like this, I wouldn't think twice about it. Coke has a reliable long term business model. Even if Coke is overvalued, they will make me money in the long run. Since Qualcomm's business model is still not completely proven, I can't have that degree of confidence, and I have to consider selling some off. I don't have to like it though <g>.

Print the post Back To Top
No. of Recommendations: 0
Sorry for the dumb question but from that link how do you find the short number


Not a dumb question - I didn't address your question directly. Try this. As you can see there are higher expectations for profit through shorting within the industry than those willing to bet on out-guessing qcom. Good luck.

http://www.thomsoninvest.net/cgi-bin/info_disp?ticker=qcom&ChartSelection=TipSheet&board=++&rpt_type=++&chart_type=++&alert_type=++&hn=stock_theader.inc&fn=footer.inc&template_name=++&template_st=++&template=++&site=tin&request=s0&group=++

PS - I just recently learned that the short interest is not reported very frequently. I don't like it as an indicator when a stock is very volatile.
Print the post Back To Top
No. of Recommendations: 19

ARM seems to have the backing of major telecom players. They are very good at "coopetition", which is one of those nauseating telecom buzzwords, but actually describes the current situation very well. Telecom companies need to compete, but they need to also form alliances that enable them to become part of the important new standard-creation processes.

Here's my problem with Qualcomm: they were very aggressive in promoting cdma2000 for the global third generation digital standard. Now Ericsson, Nokia, NTT-Docomo, Motorola, Chinese authorities and leading European telecom operators seem poised to make W-CDMA the de facto global standard.

Nokia, Ericsson, Motorola and Matsushita are in the process of making EPOC the de facto operating system for smartphones. Palm Pilot has ties to Nokia, Alcatel and Siemens and is trying to get in. Qualcomm's move? Form an alliance with Microsoft, spurned by practically everyone else.

Bluetooth is backed by Ericsson, IBM, Toshiba, Nokia and Motorola. Another de facto standard in the making. Qualcomm was nowhere to be seen when the standard was in development. Of course they can license it - but that's not the same thing. We are talking about the standardization process - getting the first-to-market advantage by being part of the creation process.

Motorola has Iridium and all major manufacturers are now furiously creating worldphones operating in GSM-900/1900 or TDMA/GSM formats. Qualcomm? Backing a different satellite system, launched after Iridium has mopped up the early satellite phone freaks. G is now seriously behind several intended commercial launch dates.

The list goes on and on and on. It's always Qualcomm against the world. Now - either this company really is the biggest high tech star of the Nineties, eclipsing Microsoft and Cisco. If they really can go against all the mobile telecom industry trends and pull it off, they deserve the P/E they now have.

But what do we actually know? Where are the products from the Microsoft/Qualcomm alliance? Is Globalstar really going to sign up a million subs in a year? Or is it going to end up bankrupt within a year? Can cdma2000 get even one sixth of the W-CDMA subscriber base? What exactly is the IPR income from W-CDMA for Qualcomm?

I can't find real answers to any of these questions. I have heard a lot of opinions. But that's not the same thing as real information. We don't know whether GPRS, backed by the GSM community, will succeed. But we do know that 30 operators are now implementing it. That's a fact. What's the outlook on HDR, backed by Qualcomm? We have heard the promises of data trasfer rates topping 1 Mbps - but I'm not seeing operators around the world lining up to implement it.

I have heard the dizzy pronouncements on CDMA's explosive growth. But when I look at the most recent numbers from Merrill Lynch and Strategis, the actual statistics describe declining announced CDMA network sales and declining CDMA handset market share globally. Why the discrepancy? That's one question I'd like to hear answered.

Tero

























Print the post Back To Top
No. of Recommendations: 0
I have been an ARMHY shareholder since the early days. Arm's business is not "based on IPR alone". Arm offers valuable services around its IPR. Arm's customers are buying shorter time to market, lower design costs, and relatively painless access to a continually advancing standard microprocessor core design.

Regards - EverHopeful
Print the post Back To Top
No. of Recommendations: 2
Hello all,

MYCROFT, I enjoy your posts and knowledge greatly, thank you for taking the time to add value to the message boards. You posted a reply to this original message which I will quote at the end. I think your protocol has great merit, but I have a contrarian view.

My father is now 92-years old. He went against the tide and select individual stocks. I'm sure he paid a handsome commission cost back then; I know he didn't listen to their wisdom but relied instead on his own DD. His method was long term buy and hold, believe in your own DD, pay attention and hang in there (something I still need to learn).

He bought Dow Chemical through the Employee Stock Purchase Plan as well as other blue chips. OK, I wouldn't choose the stocks that he did (except for LU which he owns via AT&T) but he has done very well by doing his homework and sticking with the companies for his orginal reasons.

I am not slamming your perspective, MYCROFT, rather I too am trying to use my father's (your Uncle's) years of knowledge (as well as success) in my own investments - it's just a different style. Also, I think we may be at different points in our life, right now I don't need income- I need growth in equity.

Hey Pop, you'll never see this but I am very proud of you and thank you for all your help in my life. Your investment advice pales incomparision to the lessons you shared with me on values.

-helen


Dear Mark,

I have a solution to your problem that my great uncle taught me about holding great companies. He told me that when a stock splits to sell the split shares and to never sell the originals. He used that system for some 50 years with great success. I have the same problem that you have with Nokia and Lucent. I will never sell my original stake but will sell the split shares that I receive from now on as I have done with my other holdings, I treat them as a massive dividend. I find this system to be the best of all worlds as it allows me to pay my bills and still beat the S&P 500 every year. Your summary of QCOM was wonderful and your cautioning of new investors to wait is admirable, you are a gentleman sir!!!! But how can you not be with such a great Roman Name (I am a Roman Scholar and am very jealous).

Best of Luck to you and Congratulations on QCOM,

MYCROFT

-helen

Print the post Back To Top
No. of Recommendations: 0
<I am not slamming your perspective, MYCROFT, rather I too am trying to use my father's (your Uncle's) years of knowledge (as well as success) in my own investments - it's just a different style. Also, I think we may be at different points in our life, right now I don't need income- I need growth in equity.>

I thank you Helen for the great story. my views are just my opinions, There are many ways to skin a cat in this business. I came late to the show with Nokia but still made 70% on my money, with that kind of return I can now hold it permanently as I can with LU!! As you said I no longer punch the clock so I need the income!!

Thanks for your post, I really enjoyed it!!!!

MYCROFT
Print the post Back To Top