Dook of Oil, Dan Niles on semiconductors, mentions INTC, AMD, MU, LSI:
zdii.com
March 2, 2000 1:25pm
2HRS2GO: Ruminations of a market
veteran
By Sergio G. Non 22GO ZDII
SAN FRANCISCO -- A lunch time
conversation (slightly rearranged) yesterday at
the Robertson Stephens Tech 2000
conference:
Add your comments to the bottom of this
page.
"Market's going crazy today, I'll tell you," the
gray-haired, tweed-jacketed fund manager
said as he munched on salad.
The journalist chuckled as he wiped away
flecks of blue cheese that splattered onto his
hand. "I'm certainly not one to predict macro
trends in the market."
"I had a client call me, he says, 'What do you
know about biotechs?' And I tell him, 'I don't
much about them.' So he says, 'See what you
can find on this one, I think the ticker symbol
was HYSQ or something like that.'
"So I get a bunch of analyst reports, put it all
together and send it to him, and he says, 'Buy
me 1,000 shares.' And I say, 'But Milt, it
already went from 2 to 7.' And he says, 'I don't
care, buy 1,000 shares anyway.'
"That was back in November. Now it's up
around 100.
"And I'm supposed to be managing his
money."
"Well, what can you do? Who can explain
what drives stocks these days?"
"He's not with me anymore. I do value -- you
know, the safe stuff. I follow the Mercks, the
Pfizers, not the biotechs. Last year I went up
41 percent, more than double the S&P 500.
But I guess that's not good enough for some
people anymore."
"He was probably looking at the Nasdaq."
"You look at these stocks and they go up for no
reason. Power Integrations (Nasdaq: POWI) is
up 8 points today. I was at their presentation
this morning, it's the only one I went to, I've
been a long-time shareholder. Did you see it?"
No, I'm afraid I missed it.
"I like the company, but it's up 8 points! What's
different about this company today from last
week? Nothing. Most of these stocks that go
up or down, what's different about them from
one day to the next?"
Maybe people are just trading on technical
indicators these days. No one looks at
fundamentals anymore.
"It's the only thing you can do nowadays."
So who else have you seen so far in the
conference?
"Went to IBM (NYSE: IBM) yesterday, they did
a really good job talking about their services.
Everybody's talking about services and
'e-business' these days.
"We used to follow H-P (NYSE: HWP) by
counting how many oscillators went out the
door. You'd go to an H-P presentation and
there wouldn't be a single question asked
about services, a $4 billion business. Not a
single question."
"Now it's all they talk about."
"You've got to do it. But a company has nothing
one year and all e-business the next? They
make it seem like it comes out of nowhere."
"I guess a lot of it is cannibalizing."
"And these IPOs! It's unbelievable."
Everybody's trying to find the next hot thing."
"You want to talk about selective disclosure --
see if you can get your hands on the IPO
papers they put in the hands of the institutional
sales force. Totally different from the
prospectus. The sales force has forecasts for
the next 10 years. And the VCs, the venture
capitalists -- they have monthly sales reports at
their fingertips and detailed estimates. If you
can get your hands on those..."
"If I could get my hands on those, I wouldn't
be a journalist. I'd be making money on the
other end."
Other issues:
Semiconductors Robby Stephens chip and
computer systems analyst Dan Niles has
been popping up in the media this week as
journalists peg him at the Tech 2000
conference.
Not wanting to feel left out, I caught up for a few
minutes with Niles, who probably stands as
one of the more influential analysts in his
space. Excerpts from the six and a half minute
talk:
"The best buys are always the ones that
people don't like, because those are the ones
where you make the most money. We
upgraded Advanced Micro Devices (NYSE:
AMD) at 17 when everbody hated it, and last
week you had some people upgrade it at 40.
I'd personally rather have bought it at 17 than
40.
"It's the same thing with Intel (Nasdaq: INTC),
Dell (Nasdaq: DELL) and Micron Technology
(Nasdaq: MU). They're a great buy because,
number one, not everybody loves them, so they
gives them some more psychology to change;
but number two, in my mind, the fundamentals
have clearly turned positive, so it gives you
something to build on going forward into the
year.
On his favorites:
"The ones I like the best on the semiconductor
side are Intel and Micron, which I would also
classify as computer hardware plays. but I also
think Microchip Technology (Nasdaq: MCHP)
is a great buy. Here's a company that grew
earnings at over 40 percent year-over-year the
next couple of quarters. It's valued at about 30
times, multiple should be more like 40 and
change.
"I also like LSI Logic (NYSE: LSI), who's
growing earnings at 100 percent
year-over-year, and there's still a big multiple
expansion that I think is coming, as they do a
much better job in the communications
market."
On competition between Intel and AMD:
"Everybody always wants it to be either-or, but
you can own both. Intel's very focused on
corporate America and Windows 200 and
AMD's more focused on the consumer market.
"It's always amusing how people always want
to turn it down to one guy or the other. the
answer is, you can own a bunch of them and
make a lot of money. It's not a zero-sum game
in almost any space.
"How many Internet companies are there?
Your ZDNet readers love to read about the
Internet, but I don't see any of 'em saying
AOL's gonna rule the entire world, so I want to
sell 'em all. You've got, I don't know how many
Internet companiees public now, what, 300 or
400? You've got what, two big microprocessor
vendors? Seems like a lot easier to invest
when you have two guys than when you have
300 and you really have no idea what's going
to happen.
On choosing companies to cover:
"They're all in the technology area and they all
cover different parts of it. You don't buy
semiconductors, you buy systems, so if you
can figure out which systems you think are
going to do well in the coming years it gives
you a better idea of what semiconductor
companies to recommend.
"The problem is, you don't want to be defined
too narrowly. If all you cover is semiconductors
how do you know what's going on in the
computer hardware industry? Are you better off
listening to Intel or are you better off listening to
the customers? I believe that the customers
are the ones who buy the product. I'd much
rather listen to Dell and Compaq (NYSE: CPQ)
because they're the ones who know what's
going on." 22GO
Is value investing dead?
? Post Talkback
Merck & Pfizer are safe?!?!?! plea... Michael
Seneadza
Symbol: AMD (Nyse)
Last Trade
2:53PM
39 3/16
Change
-1 5/16
% Change
-3.24 %
Market Cap.
5,769(mil)
-193(mil)
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Symbol: CPQ (Nyse)
Last Trade
2:53PM
26 5/16
Change
+ 5/16
% Change
+1.2 %
Market Cap.
44,573(mil)
+529(mil)
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Symbol: DELL (Nasdaq)
Last Trade
2:58PM
44 5/16
Change
+1 9/32
% Change
+2.98 %
Market Cap.
113,669(mil)
+3,287(mil)
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Symbol: HWP (Nyse)
Last Trade
2:53PM
133 3/4
Change
+ 1/8
% Change
+0.09 %
Market Cap.
134,419(mil)
+126(mil)
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Symbol: HYSQ (Nasdaq)
Last Trade
2:57PM
93
Change
-8 11/16
% Change
-8.54 %
Market Cap.
1,212(mil)
-113(mil)
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Symbol: IBM (Nyse)
Last Trade
2:53PM
104 15/16
Change
+4 11/16
% Change
+4.68 %
Market Cap.
189,161(mil)
+8,450(mil)
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Symbol: INTC (Nasdaq)
Last Trade
2:58PM
116 3/8
Change
+ 1/2
% Change
+0.43 %
Market Cap.
388,809(mil)
+1,671(mil)
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Symbol: LSI (Nyse)
Last Trade
2:53PM
67 3/8
Change
-2 5/8
% Change
-3.75 %
Market Cap.
20,041(mil)
-781(mil)
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Symbol: MCHP (Nasdaq)
Last Trade
2:58PM
61 9/16
Change
- 11/32
% Change
-0.56 %
Market Cap.
4,715(mil)
-26(mil)
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Symbol: MU (Nyse)
Last Trade
2:53PM
94 3/8
Change
-7 3/8
% Change
-7.25 %
Market Cap.
25,503(mil)
-1,993(mil)
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