Cary,
My plan had three elements:
1. The previous cycle' PE;
2. The estimate of peak earnings - would improve as we approached the peak;
3. market irrational exhuberance.
The 20% and 30% projections were initial starting points as were the 1999 and 2000 EPS estimates. These greatly underestimated AMAT's performance. The new data does not reflect over exhuberance or an extension of the cycle, but certainly reflect a strengthening.
I have not predicted that the end is "in sight." In fact, I have stated repeatedly that 2002 will be the peak year. This is based on industry leaders predictions, the length of time to bring on new fabs, capacity situations at the semi-equips, forecasts of the cycle by industry and research organizations, and the current ramp velocity.
My peak EPS for AMAT is $4.50 in 2002 and my peak price (at a 20 PE) is $90. The market's irrational exhuberance gave us $115 already. I sold 70% at $95 for AMAT, $47 and $53 for LRCX, $50 for ASYT, etc. At that time, tax considerations and irrational exhuberance on these threads and the lack of support of my plan, kept me in the 30%.
I believe that the price declines in the sector have been based upon:
1. fall in what were ridiculous tech prices (market);
2. Semi-equip prices discounted the cycle peak so they fell;
3. when semi-equip prices reached reasonable and in many case bargain prices, momentum and the beginning of cycle worries continued to clobber them.
I think that there will be some rebound, but it should signal selling rather than buying.
Cary |
