Thank you reader for holdin’ the West Coast down and keeping up with my blog and some of the big names in the stock game. Here is my response to your comment from the June 1 Stocks and Locks post:
Qualcomm – Being that my strategy normally addresses momentum plays QCOM has definitely been on my radar. But trying to catch QCOM is like a magician trying to catch falling knives…it might look like magic until you need surgery. QCOM recently got pimp slapped by the US International Trade Commission, who voted to partially ban phones imported to the US with chips involving an ongoing dispute with Broadcom. So sorry to break the news but:
1. ITC ban will affect QCOM’s bottom line
2. Any possible licensing agreements cripple QCOM business (kinda like Snoop’s character in Training Day)
These two things indicate this is a poor momentum play in the near term. The only positive thing that QCOM has on its side, is that so many US wireless carriers use phones with QCOM chips in it. They will lobby on behalf of QCOM to remove the ban. So unless you’ve got some friends at the ITC I would stay away from this stock until more news is released. The good short term momentum play here is Broadcom (BRCM). Broadcom stands to gain the most through an outright ban or some possible settlement or licensing agreement. And I will give you one more Urbanomic head’s up…check out the executives at the company. More than one executive in the last week has sold the stock playa!! They to are taking their money and running until this blows over!!!!
AT&T – I’ll make this one short because there is a lot of hype surrounding the I-Phone. That would normally be good for my momentum strategy of beaten down stocks…but the trick is you need to know something that the rest of the public doesn’t know. I would argue the run up in AT&T may already reflect the growth from the new I-Phone. Secondly, T isn’t a pure play in wireless…you’ve got broadband and fixed line businesses that also impact earnings. I will tell you when evaluating T, one important factor to look at is churn rate. They are second in the major 4 wireless carriers in keeping their customers which is good, but they haven’t been adding new customers at an alarming rate. So you will probably point at that the I-Phone will increase subscribers with over 1 Million people already on a wait list. I concur with your comment but also point out that you don’t know how many of those customers are already AT&T customers (which boasts to have one of the largest wireless customer bases). So with that unknown variable and the fact that this product will sell out because Apple (AAPL) wants to sustain the hype by not flooding the market…there won’t be that much new subscriber growth. I do believe their will be that growth in the future but for now AT&T is a long term play. Look for a short pop around the release of the phone for a quick play but your best bet is to wait for some pullback and load up on this stock for the long haul.
Apple (AAPL) I think you are asking about AAPL not APPL. So I will analyze Apple. This is the Wall Street darling that everyone has an opinion about and some of us missed the great ride. I will admit I thought the I-Pod was going to be a novelty item and it steam rolled AAPL to consecutive quarters of great earnings. Now the I-Phone is poised to do the same. But as you read in my analysis on AT&T, I think AAPL already reflects some of the value from the I-Phone. Again with a limited number of phones being produced initially the only thing AAPL stands to gain from is the pricing power. They are selling the phones for $499 and $599. Lastly, find out how well received their new operating system upgrade will be. I do believe AAPL still has room to run, but wait for a pullback in the stock and ride the I-Phone and OS upgrade wave to higher earnings.
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