(April 2004)QUALCOMM (QCOM) -- At QUALCOMM's 2004 annual shareholders' meeting, Dr. Irwin Jacobs detailed how the worldwide market for CDMA subscribers would triple during the next few years. This growth is being fueled by WCDMA (UMTS) networks finally coming on-line in Europe, increased growth in Japan and other Asian countries (such as India) and Latin America (Brazil). The next few years don't even depend on China. We look at it this way ... if the CDMA market is going to triple, why wouldn't QCOM's profit double? Since QUALCOMM is on a run rate nearing $2 EPS, it wouldn't be surprising to see it achieve $4 EPS in a few years. If so, how might the market value the stock? With a P/E ratio of 20, a stock price of $80 seems reasonable, and with a higher multiple, it would not be surprising to see the price rise above $100 within a few years. (The price was in the 60's as of April, 2004, when this was written. The stock has since split, and as of November, 2004 we stick by the story.) As of the end of June 2005, the price is below $35 and we stick by the story.
(April 2004)Rubio's (RUBO) -- We all love Rubio's food -- at least all of us in San Diego do! The only complaint we have about Rubio's is they don't know how to make money. Perhaps that is about to change. The new menu, featuring "Street Taco's" made from a choice of beef, chicken or "carnitas", is a real hit. The new menu appeals to a larger audience than the traditional fish taco and lobster burrito. With the new menu, a new store concept, a been-there-done-that management team and Governor Arnold Schwarznegger "terminating" the excessively high cost of workers' compensation insurance in California, we think Rubio's is repositioned to do better financially. In June 2002 Wendy's purchased Baja Fresh, a Rubio's competitor, for $275 million cash. At that time, Baja Fresh operated 169 stores. At the beginning of 2004, Rubio's operated or licensed 150 restaurants, and as of April, 2004 had a market value of $66 million. Update June 2005. The stock is trading ataround $10, and we stick by the story.
(Disclaimer: This is not a recommendation to purchase securities. We do recommend that you use CDMA telephones and eat more fish tacos. Alliance Int'l and its management own shares of QCOM and RUBO.)
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