Here is an article from Briefing.com that may shed some light. Pay attention to the second to last paragraph.
All I am saying is that the price action of XICO the last 3 days (2 of which were the biggest and second biggest declines ever) suggests that something good is going on at XICO. Even KLIC, which announced great news, wasn't able to match XICO's stock performance over the last two days.
I have made a lot of money buying or holding stocks that exhibit relative strength in a market correction. They are generally your best performers when the up trend resumes.
Kulicke & Soffa (KLIC)
07-Jan-00 00:05 ET
[BRIEFING.COM - Patrick J. O'Hare] What do growth and value have in common? Typically not much when discussing stocks as these terms are often viewed as distinct opposites in the equity market. In fact, in the world of mutual funds, many fund managers are given mandates to invest only in "value" stocks or only in "growth" stocks. In the case of Kulicke & Soffa, though, you get the best of both worlds which isn't so bad in the current environment.
Right now, there is a rotation going on that favors value, and in many instances, it is coming at the expense of the growth stocks, namely the technology issues. If there are any areas in the technology sector that are likely to exhibit better relative strength than others, we suspect they will be the chip and chip equipment companies. Having suffered what was a rough two years, most of those stocks emerged in the middle of last year in resounding fashion with investors, brokerages, and industry think tanks anticipating a cyclical upturn as demand for chips was stoked by an increased demand for wireless, PC, broadband, and other communication products.
In the wake of the Asian crisis, chip makers were struggling with supply issues, and by extension, so, too, were the chip equipment makers. Capital spending was cut as the chip industry contended with over-supply and a commensurate drop in prices. Fortunes have turned, however, with the Asian economies beginning to rebound and the proliferation of communication devices. Now, that tendency among the chip makers to scale back on production a few years ago has created a new problem: supply constraints. The latter was most recently demonstrated in Gateway's earnings miss being blamed on a shortage of microprocessors from Intel-- the industry leader!
If you believe the findings of the Semiconductor Industry Association (SIA), the chip industry is expected to post double-digit gains from 1999 to 2002, with anticipated revenue growth of 15% in 1999 to $144 bln, 21% in 2000 to $174 bln, 20% in 2001 to $209 bln, and 12% to $234 bln in 2002. That's a whole lot of chips being sold, but bear in mind, those estimates are predicated on assumptions of a healthy worldwide economy, 13%-17% PC market growth, and that Internet usage will soar to 1 billion users by 2005 adjoined by an "explosion" in Internet commerce. If that bullish scenario plays out, the chip equipment makers should be busy the next few years as the chip companies, which some fear under-invested in their factories in the throes of 1997 and 1998, rush to meet demand and to increase their efficiency.
Already, we have seen the vestiges of improving fundamentals for the chip equipment makers as many companies have returned to profitability, have noted increasing backlogs, and have posted sequential improvements in top- and bottom-line results. Kulicke & Soffa is no exception to that trend. The company returned to profitability in the September 1999 quarter with net income of $7,352,000 or $0.30 per diluted share. Ending backlog at that time was $93 million compared to $88 million at the beginning of the quarter, and sales were up 38% on a sequential basis to $153,375,000. Commenting on those results, Kulicke & Soffa's CEO, C. Kulicke, proved prescient when noting that excellent customer receptivity to its new 8028 wire bonder and record business in its packaging materials segment, combined with a cyclical upturn, should lead to a significant improvement in results through the coming fiscal year.
On Tuesday, the company pre-announced a positive earnings surprise for its fiscal first quarter, indicating that it expected revenues to be in the $175 million range, and that earnings per share should exceed the consensus estimate of $0.36 by more than 30%. Furthermore, bookings were very strong during the quarter and will come near $200 million. Even though the Nasdaq posted its largest one-day point decline ever that day, shares of KLIC still advanced 3.3% on strong volume. Reflecting the improved relative strength of the chip equipment maker, the Nasdaq posted its second largest one-day point decline yesterday, and yet, shares of KLIC still edged fractionally higher. As a reminder, those stocks that hold up best in a down market are typically the ones that lead the market in an ensuing rebound. In many ways, this week's performance also reflects the appeal of the stock as a value play. Despite a strong run beginning in September that saw the stock more than double, KLIC still trades at a remarkably attractive 20.9x est. FY00 earnings and 12.7x est. FY01 earnings-- sizeable discounts to the overall market. As noted above, KLIC also has growth stock appeal given its restored earnings momentum, improved visibility, and a 5-yr projected growth rate of 16.8% that is more than a third greater than the growth rate for the overall market.
Eventually, we believe growth stocks will regain their leadership position, and KLIC should be right there when they do, but it can still serve as a safe haven in the current environment given its discounted valuations. In short, this stock has broad-based appeal from an investment standpoint that should help it stand out above most others in good times and in bad.
Patrick J. O'Hare |
