I really did not expect so much strength shortly after the split. My usual assumption is that prices run up going into a split and drag thereafter, but here we are at a new 52 week high today--actually new all time high. There aren't a lot of those in my 40 stock portfolio. Maybe only this one. I have watched Valmont for a long time without owning any, so it is nice to hear from someone else who also is aware of VMI. Also doing quite well.
Yes, it seems we have picked up some irrational exuberance for RAVN. At least I do not assume there is some monolithic "THEY" out there who know more about the company or its stock than ya'll and I do. And I think we agree that the price is on the high side of reasonable. I still have my order in place for sale at $19 as it did not fill before the split (at $38), but the problem with RAVN is that there is so little volatility in its price that I worry about being able to buy back significantly cheaper.
Bought more QCOM today after being at the annual meeting Tuesday and now writing from Douglas AZ library. Wondering if I shouldn't be buying more UTR also, cupcake. I read your statements about IBNR (what is it? Investors business?) and Greenberg or was it Greenspan. Anyway, I figure I bought at high enough yield--and am happy to own it despite the price drop. Still, are they apt to keep paying so much or return to a level of earnings which make maintenance of the dividend intact?
Best regards, L.
Well, that's an interesting look back at 2003. I have no idea how such an old post showed up on this message board, but I enjoyed reading my old rambling talk about QCOM and RAVN with two of my favorite people, skunkybeer and cupcake boojum. Skunky still shows up once in a while to let me know I'm off base. Cupcake, not so much. So it's now about 10 years later. QCOM is over $100B in market cap and has recently passed Intel, Nokia, and many others. RAVN has also done well--even better percentage of growth wise and is up to $1B. I wonder if this chart comparing the stock price of the two companies going back to right near when I made my prediction will transfer to you guys. QCOM still growing better than 20% most years, RAVN we'll see tomorrow morning if they are running on all cylinders.
I really like Yahoo. And as soon as I get used to this new message board arrangement, I'll like it also. I have very little new but am still amazed at how far RAVN has fallen with no reason that I'm aware of. I bought some more today at $25.60 because I believe in trusting my own knowledge more than guessing someone else knows more than I do in the market--many people at Raven know more than I do, but I doubt whether they influence the market, so I'm still regarding such a drop in price as an anomaly which will at least partially rectify itself over the next year. But I shall lose quite a bit of money if I'm wrong. Good luck.
Oh, and TI is out of the competition entirely I believe. They decided to concentrate elsewhere. So I must be prescient, brilliant or lucky. I think I know which, but you guys should decide for yourselves before gambling that I know what I'm talking about regarding your investment in Raven.
"...$19 of Raven vs. $33 for QCOM is one which I'll remember and bring back for comparisons over the next few years."
Ha ha ha. I'm going to diary it. I'm not sure whose side I'm on on this one!
Oops, something wrong there, Slick. $1B for 800mm shares is more like $1.25 than .79 and they will, in fact, earn more than $1.40 a share this year (with the year half gone as they end in Sept. I just happened to notice that problem with your numbers though perhaps I should go through more of them. Appreciate a pretty nice job of summarizing the differences and your going to a bit of trouble to see where I might be coming from. Incidentally, the company has also been so bold as to predict over 33% growth for the next 4 years and, as far as I know, they have never failed to exceed their stated predictions if one excludes investments outside of the company. There have been some pretty significant losses in those types of investments which have sometimes turned around after they were written off. NextWave, Leap Wireless, the FCC court case on Miami spectrum, Pegaso, GSTRF, NetZero, and many more. Those types of losses are less and less necessary to the situation and are generally turning around now and showing gains after having been written down. The company does not, IMO, attempt to show better numbers than justified.
By the way, I think the challenge to me as to the $19 of Raven vs. $33 for QCOM is one which I'll remember and bring back for comparisons over the next few years.
Best regards, L.
>>I don't believe the company is worth twice as much today as it was a bit over a year ago. <<
That's pretty subjective. Over the last few years, there have been a lot of people getting creamed who couldn't believe company XYZ (or QCOM for that matter) wasn't "worth only half" of what it had been a year before. A few more "halves" and they'll start to get the idea.
>>The growth potential is not nearly what it is for QCOM given that most growth is from improving efficiencies and, as I pointed out, Raven requires additional capital in the form of extrusion machines, warehouses, sales reps, bad debts, and all of that in order to grow sales 30%.<<
Perhaps. Let's start by saying I don't really now what the growth rate of either RAVN or QCOM will be over the next 6-10 years. For years 1..5, I'm willing to believe QCOM's will be better.
However, but if RAVN can sustain longterm ROE's in the high teens or better, without getting silly on the leverage or dilution, it's worth a lot more than $18/shr. They don't need anywhere near 30% top-line growth to sustain those.
FWIW, I don't think QCOM needs 30% revenue growth longterm to support the current share price. The problem I have with QCOM is trying to see where it would be five and beyond.
I just don't buy blue-sky assumptions that CDMA will become an impregnable franchise. It may work out that way, but the most relevant analogy I can think of is Intel's x86 chips. But when you look at how Intel got there, you realize that a lot of good things had to happen to get them where they are now. Any number of "bad" events or decisions could have completely derailed them long ago. So now, will there ever be another critical technology so dominated by a single player? Probably. Will it be CDMA? Let's just say I don't want to have to *pay* for that lottery ticket.
The way things normally play out in technology, you get a 3-5 year window to make your mark. If you get that far, you have a decent market share/installed base you can milk for another two or three years. After that, it will be "What have you done for me, lately?". When you hang out a carrot like "near 100% gross margins", you damn-betcha you'll have an aweful lot of extremely bright people burining the midnight oil trying to get a piece of the action. If this is the future for CDMA, then $33 isn't necessarily a bargain.
An interesting comparison - a big company vs a small company.
# Shares outstanding--- 788.9M
# Shares outstanding---9.11M
If QCOM achieves 1B in profit next year (as you suggested) that will be about $.79/share thereby increasing the book value by 10.56%. Should Raven achieve earnings next year equivalent to this past year (of 1.17), that will increase the book value by 15.89%
Yahoo has an estimated one year target of $44.43. That is a 27.6% increase. An equivalent increase for RAVN would put it at $23.14
QCOM has significant cash on hand but the PE is quite high. They are in a very competitive and volatile market.
If you are looking for yield, then RAVN is the place to be. Though diversified, they are a conservative company. Unlike QCOM, they are unlikely to unveil an exciting new product. Future growth is questionable.
RAVN doesn't need to grow 30% to justify its current price. I know nothing about QCOM, but your reasoning sounds dangerously like the reasoning of far less intelligent people a few years ago. How secure is QCOM's technological lead, and can they be sure their technology will prevail even if it is the best? No need to answer me.
Oh, I see what you were saying. I'm not predicting a 40% growth rate for any particular length of time but pointing out that is what happened recently. My own internal assumptions are between 15 and 30% growth in earnings for many years. Last year was exceptional. I believe it was just the last quarter which showed 58% growth year over year. Total CDMA handsets last year were about 86mm and the prediction for this year was just over 100mm but was raised to 105 to 112 more recently at the end of the first quarter in Dec. You talked about trusting management at BRKA, and that is a lot of the reason for my confidence here as well. L.
About 10 years for the major moves though there is plenty more where that came from. But if you want more information you best send me an e*mail at email@example.com
I am in Austin on my own ISP (Earthlink) now and that is a major improvement.
The other side of your question was why I regarded Raven as high at $19 (you said $18, but I offered to sell at $19). I don't believe the company is worth twice as much today as it was a bit over a year ago. So either it was too low back then or too high now or (most likely) a combination of the two. The growth potential is not nearly what it is for QCOM given that most growth is from improving efficiencies and, as I pointed out, Raven requires additional capital in the form of extrusion machines, warehouses, sales reps, bad debts, and all of that in order to grow sales 30%. They have money, but nothing like the debt free $3.7B of QCOM and growing by another B every year (until they did a dividend and stock buyback announced last week). L.
>>I read your statements about IBNR (what is it? Investors business?) and Greenberg or was it Greenspan. <<
(Cupcake will surely correct me, after she stops chuckling) To an insurer, IBNR reserves are for claims like disability, etc. Greenberg means Hank Greenberg, CEO of the "glamor" insurance company AIG. Several days ago, AIG took a whopping charge to shore up it's IBNR reserves (remember I mentioned big ugly monsters can hid in small places for insurers). This sent the whole property-casualty insurance sector into a funk.
[Today, I sold my Raven to buy Berkshire Hathaway. *Intentional* underreserving is not something I worry about there.]
IBNR = "Incurred but Not Reported," or (the estimate of) those amounts which the insurer will be liable to pay but for which no claim has yet been filed.
The (now) classic example is asbestos for which insurers are still paying out claims on policies they wrote over twenty years ago.
Incurred losses = Reported losses + IBNR
In certain liability lines such as General Liability and Workers Comp (and A & H, I would suppose), the IBNR component of incurred losses on a calendar year basis is substantially greater than the reported losses.
Skunky, what did Uncle Warren say about investing in businesses you understood? Cupcake isn't chuckling; she's shaking her head sadly.
BTW: I'm changing my disclosure to "sell" because, I've got to tell you, Raven is now officially overvalued - and NOT just because I want it for less.
Women don't chuckle--they titter. Speaking of unreality and AIG, I just read the news from someone indicating that TI and Intel are in a battle for dominance of the cellular chip industry. Certainly deserves a chuckle from me since both of them are so small and irrelevant relative to QCOM, the largest fabless manufacturer. Ah well, keeps giving me some chances to refill my stock at good prices. Got some at 33 today after QCOM raised its predictions for earnings and reassured again at the annual meeting. L.