>Go-go/mo-mo juice ... ?
wavplace2.com
whatever it is, i'll have what you're having, steve. pour me a glass, will ya?
while you're at it, give Gus a swig too.
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TIP SHEET: Emerging Growth's Richard: Patience On Chips
By Christopher Grimes
11/29/1999
Dow Jones News Service
This story was originally published late Friday.
NEW YORK -(Dow Jones)- If you missed out on the amazing run in semiconductor stocks this year, Gus Richard has some advice for you.
Richard, senior analyst at Emerging Growth Management in San Francisco, said the chip sector is in the healthiest shape he's ever seen it. But "the hitch in the giddyup," he says, is that this isn't a secret on Wall Street - and hasn't been in over a year. The stocks are expensive.
"The stocks have made huge moves," he said. "I don't think these stocks have any room for error."
For the record, semiconductor companies began their rally last fall, marking the end of a dismal three-year slump. The Philadelphia Semiconductor Sector Index closed Wednesday at 635.56 - up about 80% since the beginning of the year, when it opened at 350.56.
That makes buying right now a little risky, Richard said. But he thinks there may be another chance to capitalize on an expected three-year growth spurt in the chip sector.
"If you missed it last October, you missed a huge portion of the move," Richard said. "But the fundamentals of the stocks are phenomenal. My best advice is to look for near-term negatives."
Richard, named a 1998 Wall Street Journal All-Star analyst before moving over to the buy-side almost a year ago, said investors in chip companies could get spooked in the first half of next year, maybe even in the first quarter.
"These stocks are going to take a rest," he said. "People are going to rotate out of this group at some point ... maybe in the first quarter when fundamentals look bad."
Richard is "relatively confident" that the chip sector - known for extreme volatility - is going to have industrywide inventory problems in the first quarter. That's because companies appear to be stocking up on components in the wake of the Taiwan earthquake and in preparation for year 2000 disruptions, he says.
"Inventories are being built up, and we're going to go into the first quarter of next year with (companies) heavier in inventory," he said. What is really a near-term hiccup will seem like a signal that growth is slowing.
And at that point, Richard said, investors "will get an awesome buying opportunity."
The names he likes: Applied Micro Circuits Corp. (AMCC) and PMC Sierra Inc. (PMCS), two companies that he believes "are capable of growing 70% annually."
He also likes analog chip makers like Linear Technology Corp. (LLTC), Maxim Integrated Products Inc. (MXIM) and Micrel Inc. (MCRL).
These stocks have had an amazing year. PMC Sierra is up 240% since the beginning of 1999, Applied Micro is up 397.6%, Linear Technology is up 74%, Micrel is up 84% and Maxim is up almost 98%.
"You want to invest in these companies because the growth is going to be phenomenal," he said.
All of these companies are plays on either the insatiable need for more Internet bandwidth or on the handheld device market, he said.
"The world isn't about PCs (anymore), it's about connectivity and bandwidth," he said.
But what about the best-known chip company, Intel Corp. (INTC)? The analyst says Intel has had a rough year, but he likes the company's recent investments in the communications area. Whether to buy Intel depends on if you're interested in trading for the short term or investing for the long-term, he said, suggesting Intel as a long-term play.
"They're building a formidible [sic] presence in communications, and they've got great management," Richard said. "I wouldn't count them out." |
