re: Do you have GTC order at 30?
Actually, when (if) the stock hits a P/S of 3 (which currently means a stock price of 30), then I will probably start buying out-of-the-money-longest-term LEAPs (probably 2003 50s), in increments. I would then continue buying (say, 50-100 contracts each month), as long as the stock stays at or below 30. Since I am currently fully invested, this would mean selling something else, to free up cash. The longer the stock stayed that low, and the lower it went, the greater a proportion of my money would be in AMAT LEAPs. I did this in 1996, with the stock (I wasn't buying LEAPs yet), and by January 1997 I had 100% of my money in AMAT (that's right, a one-stock portfolio). I started doing this again in 1998, but the stock didn't go down as low as I thought it would, for as long as I thought it would, and I only got 200 contracts (I had planned on getting a lot more). When the 2004s become available, if the stock is still below 30, I'd start buying them. And, if we get to 1996-type valuations, I could possibly have 50% of my money in AMAT LEAPs (I won't go to 100% ever again in one stock, although it was very profitable when I did). Again: I have no idea if the market will give me those buying opportunities. I simply make a plan for what I'll do if it does happen, and then wait to see if the opportunity presents itself. If it doesn't happen, then I put my money elsewhere. I don't have to own this stock, or any stock.
Yes, I do want to "have my cake and eat it too". I'll buy when I calculate a near-certainty of a doubling in the stock price before the LEAPs get within 6 months of expiration. If I don't have that certainty, I won't buy. This stock is extremely volatile, and options (even longest-term) are so risky, that I have to get an excellent valuation, or the risk-reward balance isn't good enough. Every cycle, with the semi-equips, there are many people who lose a lot of money in them. This is especially true for people who live dangerously (like me), using margin and options.
In 1998, the stock bottomed at a P/S of 2.2, so I would be willing to begin buying now at a P/S of 3, whether or not I think the cycle is over. My point is, I don't know (and neither do you or anyone else) whether the cycle is over. If you are certain you know the answer to that, then you are being overconfident. It is just not possible to predict the future, with that much certainty. That's why I buy and sell strictly on valuation. When I finished selling my AMAT LEAPs in January 2000, I did not see the end of the cycle. I simply said, "at this valuation, the stock price is more likely to go down than up." I Believe in Reversion To The Mean. For AMAT, the natural channel is a P/S of 2-6. That's where it is, 90% of the time over the last 10 years, and moves above and below that range don't last very long.
re: "I have position in other semi companies such as MTSN,PRIA,CMOS,TER":
Another one of my rules is to buy the best in the industry. It is always at the highest valuation of the group, and paying that premium is always worthwhile. I think, at the moment, it is particularly important with the semi-equips. I think AMAT is in the process of doing to its industry what CSCO did to network equip. That is, a collection of niches (with a small company owning each niche) is going to be gobbled up, niche by niche, by a dominant company that ends up with a end-to-end solution. AMAT is the only candidate for achieving this, and the process is well advanced. Eventually, the Justice Dept. will start looking at AMAT (when they get through with MSFT and WCOM and CSCO), but this is many years away.
You are trying to label me, as a PermaBear who is trying to talk the stock down, and who will never buy no matter what the price. I have a long track record that says otherwise. I will wait for my price, and I will stick to my rules. |
