Wednesday, December 08, 2004

FON TO SPEND $3,000,000,000!

Sprint is playing catch-up quickly. Instead of spending 1 Billion on their high speed data network, the company let contracts with LU, NT, and MOT to spend 3 Billion!

As those who know about my portfolio might guess, QCOM was one of my top performers today. Sprint just joined all the big boys in offering a another service where QCOM gets a small royalty off the transactions. The royalty is very very small but boy there sure are a lot of transactions! In about 2 years, this stock has gone from $7 to $45. In past letters, I have said to buy this one with confidence. Let me repeat, buy QCOM with confidence. Put it in the grand-kids accounts and forget that you have it.

FON is not a bad stock either. ESPN, Disney, AT&T, Quest and others are buying billions of minutes from FON which gives them the money to go head to head with VZ and Cingular. VZ and Cingular simply cannot offer the same phone/tv service as ESPN or Disney. If AT&T or Quest offers a bundled service to their regular customers, the customer may never know that they are calling over the Sprint network. To pry the Sprint customer away, VZ or Cingular will need to take the customer away from AT&T, Quest, ESPN or Disney!

In the recent past I have recommended FLR, UNH, YELL, SCST and PEP. These (in respective order) were my top five performers today with QCOM being number 6. These are not the glamour stocks such as SIRI or XMSR. Today, I spoke to two readers and in both cases the conversation revolved around these hot satellite radio stocks.

WARNING! SIRI and XMSR are fun stocks because they whip up and down in price. If you like to trade and happen to get real lucky, you can make fast money off stocks like SIRI. However, you are trading an over-priced stock. SIRI trades based on the belief that 10 years from now they will have 45,000,000 subscribers, up from 800,000 now. There is a lot that could go wrong. If the market perceives even a small slow down in the adoption rate of the new service the stock will get hammered. On the other hand, if you buy and hold a few shares in each of the other recommendations on this page, you will almost always make a really nice rate of return within a few years.

As I told the reader who asked if today was the day to buy SIRI, I would only buy a relatively small amount with speculative money. Furthermore, my first choice for speculative money is TIVO, my second LVLT, my third is XMSR and SIRI is a stock that I liked a lot at $2 per share. I think there is a good chance that TIVO will be bought out at about $15 per share and it currently trades close to $5.

Stocks that I am likely to buy in the coming weeks include FON, IBM, GE, and WMI.


Jack's Old Merrill Pal said...

I bot the SIRI at 5 and have subsequently watched "half my profit" wiped out yesterday. I think I'll take my remaining 50% to the bank.