Jerry,
Good to talk with you again! Sad to say that I missed the move in KLAC, but I did catch a nice bounce in USRX, at least. Semiconductor equipment stocks are where energy stocks were about 15 months ago- at the beginning of a years-long cyclical upturn. If you have the time, go back and read notes Nos. 197 and 198 on the EGLS Thread. Ron Leckie, who writes the Techinvestor Newsletter identifies a very important point about equipment stocks. That is- they have high fixed cost bases. What that means is that costs do not fluctuate in tandem with revenues, or in plain English, when revenues fade, profit margins shrink. When revenues jump profit margins rise.
And that's where we are today I believe with equipment stocks. Now usually when the stock market bounces off of the bottom in a correction, it goes up a while, and then goes back down once again to challenge the bottom of the trading range. I hope to catch NVLS and KLAC there....
Also do not be fooled by the pullback in energy stocks. We are in a years long upturn in the energy markets worldwide. Prices will be flat for crude in 1997, and then resume the price increases in 1998....
Now the recent chip demand report showed chip demand down worldwide in February 1997 about 3.4%. But be careful with that report. The report also noted that box manufacturers' inventories of chips had shrunk from four weeks to only 2 1/2 weeks supplies of chips on hand for product purposes.... I am myself in lots of small semiconductor equipment makers and electronics component manufacturers with advanced technologies to reduce the size of connectors, chips,etc. as well as networking stocks (value plays). I'd think that good options plays would be April Calls on any network stocks where the stock is approaching a the 5 or 0 figure in its price- natural resistance levels. After today's short covering explosion, there should be some decent premiums on these stocks' call options on Monday.
Now be careful not to sell a call option on any stock whose earnings will be reported in the next two weeks (Check the SI Calendar), so as not to get creamed....
Sincerely,
Doug F.
Let's see where it goes.... |
