I2: Thanks for your questions on the particulars. I feel Joe and Andrew have stated the fundamental case for UTEK much more authoritatively than I could.
Regarding your first point, I would say that growth investing implies the future. If we cannot invest on a horizon beyond one or two quarters then I'd say we're reduced to trading as momentum investors. Much of the market (including most fund managers) is in this momentum mode. At the very least, it's been bogged in the proverbial herd mentality (large caps) for many months. So, providing we can avoid being caught in a broad-based market downturn, investors in the semi equipment sector can now take advantage of multiple factors converging to create the striking undervaluations:
1) the sector is moving out of a downturn, and sentiment is still reactionary and negative; 2) there seems to be a broad ignorance of just how essential these fab technologies are to the product development, and thus continued growth, of the businesses all along the chain. For UTEK, this applies to both semiconductor and mass storage head advancements; 3) also in UTEK's case, there seems to be a lack of recognition of the cost saving elements of this equipment - one of the primary criteria that investors claim to be rigorously applying to tech businesses these days. Investors haven't yet caught on; and 4) the small caps remain out of favor, ignored. How else can one explain the valuations vs the growth rates in this group? It could be argued that the small caps have yet to recover from the FIRST (recent) wave of pessimism that hit the tech sector, back in Fall '95. IMO, 1996 can be written off purely to large cap mania. Most of the companies I'm focused on are currently at or near their 52-week lows.
Time for Barton Biggs to declare an impending bear market in techs, I guess. |
