Category Archives: investment strategy

Current headlines are all about the latest and greatest gadgets like the Apple iPhone. With the news, traders flock into the stock as well as the derivatives for Apple (AAPL). Analysts recommended Verizon (VZ) over AT&T (T) because of the new growth component, the iPhone. Now the derivative traders are interested in the chip sector with companies like Qualcomm (QCOM). With the latest rumor that Apple will be dropping Infineon / Intel alliance for Qualcomm's CDMA technology, analysts and traders have suddenly fallen in love with QCOM.  With this change in sentiment, Qualcomm has risen almost 18% since September 1st.

The New Low team hasn't always been right in timing the buy but we have been (somewhat) right in suggesting investors look at QCOM back in  the March and April 2010 time frame. The stock appeared on our Nasdaq 100 Watch List on January 30, 2010 at $39.19. Although we didn't recommend the stock then, we tracked the stock for several months. In late March, a reader submitted a Research Request on Applied Material (AMAT) which put us to work.

At the end of that article, we came to a conclusion that AMAT was too rich for our blood and suggested QCOM as a better alternative. In addition, we offered a specific strategy on the purchase and how to allocate capital which panned out beautifully. On April 22, 2010 QCOM dropped like a rock after reporting earnings. With a recent dividend increase of 12% and a good entry point of $38, we took a position in QCOM.

For those that followed suit, they would be sitting on an 18% gain or 48% annualized gain. In addition to buying outright stock, we also incorporated an option strategy as a way to add extra cash. This strategy added 1.2% to our bottom line. In addition, QCOM paid 3 dividend payments during this time adding more to our bottom line.

Today, we have taken our gain.  Although we didn't buy QCOM at the beginning of the rise in September, as we held the stock, we were paid for the wait as the dividend covered the commission.  The option premiums were additional cash we took from speculators. The net return of 18% is more than enough for us to sit back, review our watch list, and wait for a better risk/reward alternative. While QCOM can certainly move to $50, an additional 10%, we can't hope or dream. We are happy to take our 18% gain and head back to the drawing board, our watch list.