Andy, regarding playing a 'cyclical' stock: I think the most important thing is timing the cycle.
The semi cycle is pretty well defined. It has been happening even since it's birth 30 years ago. It goes by process generation for fabs. Each fab can do roughly 2 process generations before they have to be put out to pasture. If one fab generation makes money, everybody piles on and creates a downer glut for the next fab generation.
I can be more than one generation like the last time - 2 generations up because of PC and Windows and then 2 generations down because the up was SO good that everybody overbuilt.
But it's hard to be less than one generation - takes 2 years to plan a fab, build it, ramp it. As such, the half cycles have never lasted less than 2 year.
We are one year into a multi year boom. As such, I'm not a bit nervous at all. Heck with 'how high the price is' or especially 'but it had already went up 5x'. The current upturn started with the new 0.25um fab last winter and will continue to 0.18um - same fab. 0.18um hasn't even gotten started yet, that will be next year. And that is how early we are in this cycle.
By this time next year, I'll start looking around to see if I need to sell. And the sell criteria, assuming products fundamentals are still the same, will really be how I perceive the supply/demand situation for the 12" 0.12um fabs. If Tialand and India and Vietnam are building fab/s, I'll be looking for an out.
But the demand is going to be something. If you go back and look at my post about STM's 56Mb modem over copper wire, that thing will support real time video etc. etc. And we'll have to completely reload the whole infracture to support stuff like that. The demand for Si will be just awesome.
Also look at the what the stock the stock did the last upturn - $3 to $60 for 15x/20x bottom to top. We are only 5x so far. Nothing to write home about yet.
Last Jan when the stock moved from $16 to $20 in early Jan., I said that $60/$70 was a done deal because the recovery's here. I got soundly critized on the $ part with nobody even commenting as to my assertion of whether the recovery is here was correct or not. (Dipy not withstanding, I think he said something to the effect that I cannot guarantee it). Well I don't think anybody has any doubt that the recovery IS here. So for me, just sit back and enjoy the ride is the easy and profitable way to go.
I think to make big money and not take too much risk, one need to hold something long term. This is the strategy of Lynch and Buffet. After making big money, then one can worry about keeping it through diversification**. I can't think of a better long term hold than LSI for those who bought in last year.
Patrick
** A few months back I saw a PBS program with Bill Gates and Warren Buffet answering student questions at some small group meeting. The question of diversification came up and Buffet essentially said that to make big money, at some times when one has really come upon a good stock, then it's time to throw out all the books, load up and hold long term. Just like the Niki motto "just go for it!". Hopefully I've found exactly such a situation in buying into LSI last year. |
