Formerly About Applied Materials Message Board

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Politics : Formerly About Applied Materials

AMAT 328.51

+1.9%

Feb 2 3:59 PM EST

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To: Dennis G. who wrote (4562)	5/16/1997 5:25:00 PM
From: Q.	of 70976

<<To me AMAT is becoming a very good short candidate. It's up 90% just this year alone and trading well above its usual range of valuation and at a significant premium to the group.>> Dennis, I must disagree with you. While I have said before on this thread that AMAT is now richly valued, I would not agree that it is 'well above its usual range of valuation.' Or even that it is slightly above its range. In fact, it is in the upper half of its historical range: The p/e is 26, compared to a 5-year p/e range of 15.7 - 32.9. The PSR is 3.0, compared to a range of 1.4 - 3.2. These 5-year ranges are quoted from Bloomberg's database. At a cyclical bottom, it is perfectly reasonable for the ratios of a cyclical-growth stock to be in the upper half of their long-term range. The fact that AMAT is valued thusly means that it is no longer a value play, but that doesn't mean it is anything approaching a good short candidate. The growth prospects for this industry and for this tremendous company are outstanding. While I think the market has already discounted those growth prospects much more than with smaller semi equip stocks that are dominant in their small sectors (such as ASYT, BRKS and UTEK) I would certainly not short a stock of a fine company with AMAT's growth prospects and financial strength at anywhere close to the current price ratios.

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