Jul. 26--While economists are predicting recovery could begin by the end of the year, one Madison money management firm is prepared if the economy doesn't perform as well as expected.

"We see more difficulty ahead because we still see the consumer struggling," said Mark Fedenia, managing director at Nakoma Capital Management LLC, Madison.

Even if the government's stimulus packages work, the money has to be paid back -- whether through higher prices or by raising taxes, neither of which will strengthen the consumer, Fedenia said.

He says technology companies are better positioned than most others.

"They have better growth prospects, and many are companies that can scale what they're doing to the current economic environment," said Fedenia, who is also co-manager of the Nakoma Absolute Return Fund.

Nakoma portfolio managers buy stocks outright, but hedge those holdings by selling stocks short to make money when the price of the stock they bet on declines.

They're now hedging the technology companies whose excess capacity make them most vulnerable to a weak economy by shorting semiconductor and semiconductor equipment companies like Applied Materials Inc. (AMAT, $13.19), Lam Research Corp. (LRCX, $32.02) and National Semiconductor Corp. (NSM, $14.74), Fedenia said.

They're holding more stable technology stocks, including one Fedenia says is the closest thing to a consumer staple in the technology area.

Qualcomm Inc. (QCOM, $47.35), San Diego, develops wireless communications products and services. Its shares have traded as high as $56.88 and as low as $28.16 in the last 52 weeks.

Qualcomm, which operates like a wireless product research-and-development lab, has become a sort of consumer staple in the technology arena, Fedenia said.

He says the company is well-positioned to benefit from the explosion of devices like smart phones that get high-speed data access from the relatively new 3G, or third generation, wireless technology.

Qualcomm holds patents on one of the main 3G networks -- the other is controlled by AT&T Inc. So when you talk on a cell phone over Verizon's or Sprint's network, or download a book to your Kindle, Qualcomm collects royalties. Such licensing represents about one-third of Qualcomm's sales, but two-thirds of its profits, Fedenia said.

Qualcomm also makes chipsets for phones and other devices. It is developing its Snapdragon processor to compete with Intel's Atom processor for use in netbooks.

"Qualcomm has a tremendous knowledge base in terms of working with communication devices and chipsets that are efficient and don't consume a lot of power or generate a lot of heat," he said.

The biggest risk Fedenia associates with the stock is the threat that a large consortium of 3G network users including Nokia and Sony could be successful at negotiating lower licensing fees. That's not a major risk, though, and growth in this area likely would offset Qualcomm's potential margin reduction from lower fees, he said.

Qualcomm shares could go as high as $60 in the next 12 months, Fedenia said.

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