<MC>"good news takes things down (expectations met, no future), and bad news drives 'em up (can't get worse ...)", and "percentages are RATIOS, not raw data"
<JS>Total bookings were down. That's raw data. Nat semi. warned (that's what, the 9th semi to do that, I've lost count). So, the stocks went down on 2 pieces of bad news. Entirely rational and reasonable. The irrationality was the April peak, at a P/S of 12, and the 1996 low, at a P/S of 0.9.
Both good points. As you've probably gathered, I'm confident of AMAT's LT prospects. What's changing my mind in the ST is the creep of those warnings - and they're beginning to be pitched as *demand-side* slowdowns -"We can't sell stuff"- instead of the prior supply/capacity warnings - "We can't make stuff."
<JS>At this point, AMAT (at a P/S of 5) is in the upper middle of its longterm valuation range, and is, IMO, approximately fairly valued. However, my experience with this stock is that "fairly valued" is just a very temporary stage, which the stock briefly hits while in the midst of swinging from absurdly undervalued to absurdly overvalued (or vice versa).
Also agreed - AMAT behaves like what we called a statically stable but dynamically unstable system in aero engineering.
Roughly speaking, take a bowl and a marble. With the bowl face-up, the marble will roll to the bottom. If you knock it around, it'll roll to a stop where it was. That's statically and dynamically stable.
However, if you turn the bowl bottom-up, the marble has a different problem. It is possible to balance it at a center point - meeting the requirement of static stability. However, if you knock it around, it'll roll AWAY from the center, not back to it. That's dynamic - or moving - instability, where it seeks extremes. It diverges.
So, I agree. AMAT is headed either up or down; it's not likely to stay at the current price. It'll probably keep going until it receives a strong enough kick in the opposite direction. (I think the professional investment word for this behavior is "volatility.")
However, there are enough investment vehicles available to profit from *any* movement ... as long as you're confident it *will* move, which I am.
My current approach is to hold a LT block of shares, but use about 10% of that value in out-of-money options. I'm currently working the JAN 01 series, which I think will be subject to motion based on:
1) Election results
2) AMAT's NOV report
3) Tax-related activity
4) Calendar seasonality
5) Short time horizons / low time premium
6) Chip company results and orders
7) AMAT production efficiencies
8) R and D payoffs
...
It'll be a choppy ride compared to your strategy, but I expect opportunities to avoid substituting activity for profit. <g>
- Mitch |
