Qualcomm: What's the Right Time to Establish a Longer-Term Position?

I want to highlight the weakness we've been seeing in technology recently. In mid-August, the Nasdaq was easily outperforming the S&P500. However, as we've slid into September, technology has given back its gains. I've been waiting patiently to add to some tech positions that are typically high-flyers. In addition, it looks as if that patience is finally going to pay off; as I can finally start to get back into some names, I've been looking to add to my core long term positions.

As I wrote here, you have to be prepared for inflationary or deflationary investment scenarios. While it's still unclear whether we're heading straight towards a deflationary environment, it never hurts to be prepared. At any rate, in that post, I highlighted how in both an inflationary or deflationary scenario, it usually pays off to be long technology. Therefore, with that in mind, my longer-term portfolio is looking to add to tech names to hold for the long term.

As detailed here, I bought Qualcomm (QCOM) back in June and it has paid off nicely. I took some profits, decreasing my position size on the most recent gap-up in July (see chart below). In addition, I've been waiting forever for QCOM to start dipping back down to fill the gap to re-add what I sold. Therefore, we're finally getting that dip and I'll be looking to buy QCOM for the long term at around $48 and then again at $44 if it trades that low. I like it at $48 because it offers a decent level of support, and my initial purchase back in June was made around those levels.

Therefore, you can bet I'm more than happy to add back at that level. I have a secondary limit order around $44, which is right around both the 200-day moving average and a nice level of recent support. Then, for safety, my stop will be placed a point or two below that last limit order, below the 200-day moving average. Because, if that area is taken out, the stock is headed much lower as it will have violated its solid uptrend.

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It's not quite to my first limit order yet, but it's getting there. There have been a few negative catalysts recently, which have started to send the stock lower, and I'm happy to see it happen! Seriously, it seems as thought I've been waiting forever to re-add to this position. On Wednesday, as StreetInsider detailed, Goldman Sachs removed QCOM from its Conviction Buy List, and on Tuesday, QCOM's CEO was on CNBC saying,

We're seeing some evidence there's a lengthening of replacement cycles.

Which, to put it plainly, means that people are putting off buying new cell phones. This near-term weakness was fully expected, seeing as how the U.S. and other parts of the world have slowed recently. Therefore, I will use this near-term weakness as an opportunity to start building up my position for the long term. As I said before, going long technology fits both my inflationary and deflationary investment scenario models. I've picked Qualcomm simply because the company is dominant in its industry and continues to perform.  QCOM is definitely a 'hedge fund favorite,' which means that lo of funds have a large position in the name. Maverick Capital and Lone Pine Capital both have large positions in QCOM. I've written about this here, and here.

It's always reassuring to see respected funds with large positions in a name you follow, because undoubtedly their teams have done more research on the name combined than I most likely could ever do alone.

I will exit QCOM if my pre-determined stop gets taken out, or if I see a material shift in its business, which would affect their long term ability to meet estimates. However, I will definitely be looking at the tech sell-off as a place to try and establish longer-term positions.

Disclosure:  The author owns QCOM.