Franz,
Im far from a fundamental analyst, but frankly my belief is that SEMI's are cyclical in nature.
I realise that there are high end SEMI's, but my understanding is that the majority of SEMI's are more towards the commodity end, whereby the rules of supply and damand work well. If Im wrong, please correct me.
Assuming the above comment is correct or partially correct, then eventually the growth levels and eventually the P/E's will return back to normal historical levels. Again, I realise that there are the high end stuff which is not as cyclical in nature, but Im assuming, as mentioned above, that the majority of revenue is not in the high end stuff.
The reason I mention this is that the SOX got as high as 1362 and was as low as 182 in OCT 98. Im not saying the the SOX will get back to the 182 range, just saying that with the cyclical nature of the majority of SEMI's revenue, which is based on the lower end SEMI's, those lower end semi companies could eventually get back to historical levels.
If that is the case then eventually the SOX could still head lower, and possibly alot lower, since it is now at 925.
As to how low the SOX could go, can we say that the higher end SEMI's, which are not as cyclical in nature, prevent the SOX from going back to the 200 range. However, is it not true that eventually the newer semi's also get commoditized. Im no expect in the SEMI's and would like to hear some feed back. Im not saying that if the SOX was to continue down it would happen all at once in a crash like pattern, so it could take in terms of years.
The reason I am bringing up this issue, is that if the SOX was to continue down alot more, that could be a major factor for a bear market in light of the the total market-cap of SEMI's being so large.
From a technical viewpoint, take a look at the following monthly chart on the SOX:
siliconinvestor.com
If you draw a TRENDLINE connecting the peaks of 1995 and 1997, that trendline is now only approaching 600. Im not even saying that it will get to 600, since I dont make the strong call, but lets look at it this way, from a TECHNICAL VIEWPOINT - if the SOX was to get the 600 range without breaking that BULLISH TRENDLINE to the downside, the SOX would still be BULLISH. Not too many would feel BULLISH if the SOX gets to 600, but technically its still bullish.
So my next question is, how long will it take the overseas countries to start ramping up their production of the lower end SEMI's, which would increase the supply and bring back some or all of that cyclical natue to the lower end semi's.
I could be totally off-track, so no need for any bulls to beat my head in, just explain where my thoughts are not in-line. |
