Ian, Thomas,
I believe that selling the semi-equips must be based on estimates of the duration of the up leg of the cycle and estimates of peak sales and earnings for the companies. With this in hand, each one of us can start selling when we feel that the current price discounts much of the cycle's potential for that company. (When I say this, I think of the mice who concluded that the solution to their problems was to put a bell around the cat's neck.)
While our task is not as hopeless as what the mice face, I am fully aware of potential pitfalls. One, is market risk. "Irrational exuberance" characterizes the most conservative investors, today; lunacy describes the rest. A severe market correction in response to mildly negative news is certainly possible. A second risk is a repeat of 1997, where the semi-equip up leg was short-cicuited by problems in the general economy. In the face of these risks, Mason's "take the money and run" strategy with >100% gains certainly has merit. But, I am greedier for stock profits than Mason is because I don't have lucrative hourly billings to compete for my time and I don't think that it is a given that semi-equips will be back to their '96 and '98 lows in a year or two.
The strategy I described on the LRCX thread, is a phase one selling strategy. I sell 40% of the shares when the price reaches 2.5 times what I paid for it. This allows me to play with the "table's" money and be a "long term" investor in the face of the risks described in the previous paragraph. As Sam Citron suggested, it is only the beginning of a selling strategy. I believe I have time to create a more complete strategy, because we are still at the beginning of the cycle's up leg.
During the summer of '97, before the downturn began, I tried to stimulate an effort on the AMAT thread to come to a consensus on AMAT's likely cycle earnings peak. I considered likely cycle durations, likely industry growth rates, and AMAT's previous cycle peak. I still think that this is a fruitful strategy. The current market's psychology makes it likely that some or most of the semi-equips will be overpriced at various times during the up leg. With a ball park peak valuation estimate, we could exit these stocks during the first period of overpricing that sufficiently discounts the reward afforded by waiting for the peak price.
Cary
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