This is recent from WSJ, but not today...These are the best stock pickers' recommendations.
July 25, 2000
Semi-Equipment Manufacturing
By KHANH T.L. TRAN
Staff Reporter of THE WALL STREET JOURNAL
Last year's turnaround in the semiconductor-manufacturing equipment
industry possibly could be explained by one idea: Moore's Law.
Named after Intel co-founder Gordon Moore,
this theory asserts that the number of
transistors that can be squeezed onto a piece
of silicon doubles every 18 months. The result
is that generations of faster and cheaper microchips drive technological
progress, and chip makers in turn must buy new equipment every two
years to replace machines that have become obsolete.
"Clearly this is a very cyclical business," said Tia-min Pang of SG Cowen
Securities, who tops the list of the sector's stock pickers in this year's Best
on the Street Analysts Survey. Born in Calcutta, India, and reared in
Liverpool, England, Mr. Pang, 42 years old, received his doctorate from
Oxford University and spent nearly two decades working as an engineer at
various chip companies in Europe and the U.S.
Mr. Pang said he began noticing an upturn in the
chip-making equipment industry in late 1998, and
upgraded the sector early last year at about the time
Intel announced its 1998 fourth-quarter results and
provided estimates for 1999 spending on
chip-making equipment. While Intel's budget "didn't
look all that fantastic," Mr. Pang said, it implied
strong sequential growth for chip-equipment makers.
Mr. Pang expects the current upturn will last at least
another 18 months, and that the semiconductor-equipment companies will
record peak revenue and orders during 2001.
Companies that Mr. Pang recommends as "strong buys" include Teradyne,
Brooks Automation, Credence Systems and Applied Materials, which is
his top choice for the coming 12 months. Because it is the largest supplier
of chip-making equipment, Applied Materials stands in the best position to
benefit from advances in semiconductors, such as chips made with copper
instead of aluminum as a conductor, Mr. Pang said.
But Mr. Pang added that he likes companies that evolve to target new
markets, rather than riding the rising economic tide like boats. Case in
point: Credence Systems, a supplier of automated test equipment. Mr.
Pang said that two years ago Credence was focusing on the low end of the
chip-equipment market. Today, however, the company offers products in
three different markets, including higher-priced mixed-signal testers, or
machines used to develop chips for the fast-growing communications
sector.
Gunnar Miller of Goldman Sachs also is bullish on Applied Materials and
Teradyne. Not only does Teradyne show strong momentum for orders of
its automated test equipment, but it also is expected to introduce half a
dozen new products by the end of the year, said the 35-year-old analyst,
who also was a top finisher for earnings-estimate accuracy.
Mr. Miller credited his childhood pastime of building radios with giving him
first-hand experience in learning Moore's Law. With a limited allowance,
he bought an electronics kit that in a few years became outmoded with the
introduction of more advanced technology, he recalled. Mr. Miller also
recommends Lam Research, a maker of wafer-fabrication systems,
because it has restructured its business and returned to profitability.
Third-place finisher Milind M. Bedekar joined Donaldson, Lufkin &
Jenrette earlier this year from Salomon Smith Barney. He too said he likes
Credence, because it offers a broader mix of products and relies on the
personal-computer industry for only 20% of its sales.
Mr. Bedekar, a 34-year-old father of two who holds a doctorate from
Rutgers University in New Jersey and an engineering degree from the India
Institute of Technology, worked in Applied Materials'
product-development group for nearly three years. In addition to Applied
Materials, he recommends Lam Research, which is still in turnaround.
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