Here's some "fruit for thought"! ART
By: walterbyrd $$$
Reply To: None
Wednesday, 25 Oct 2000 at 7:01 PM EDT
Post # of 1461
Thoughts on sector. Comments?
As I remember it, nobody said that the semi-sector was not growing. It is the rate of growth that
is supposed to be slowing. Big difference.
Many thoughtful articles have been written disputing the idea of slowing growth in the semi
sector. There is good reason for such skepticism. There is no real evidence to support the
slowing growth claim. The claim was made by a brokerage, and brokerages compete for
cheap shares in the market. Obvious conflict of interest.
But for the sake of this analysis. I am going to assume the very worst. I will assume that the
rate of growth for semis is indeed slowing. Because it seems to me that even if this is the
case: Semis, and semi related, are still the best buys in the market, for the following reasons:
> Many semis are presently 50% to 75% off their recent highs. So even if CMOS was
overpriced at 90, that does not necessarily mean that CMOS is overpriced at 17.
> Even when the semis were flying high, the average PEs were in the 40s. This is about 1/10th
the rate of many bio-techs or internet stocks.
> At present prices, many semis have single digit PEs, with expected annual growth of 20% to
40%. I don't know of any other sector where these sorts of number are common.
> Many semis have the PE of a good value stock, the expected growth of good growth stock,
and the low PEG of a good small cap, and the assets of the best multi-billion corporation. What
other sector can match?
> In fairness, some bio-techs, and fiber-optics companies may grow faster: if you don't mind
triple digit PEs, or if you don't companies that are nowhere near profitable at all.
> Much of the problem with the semi sector is blamed on slowing PC growth. Even if PC
growth is slowing, it is worth remembering that other areas of the market are growing - fast.
For example, 3rd generation cell-phone are set to debut any time now - when this happens
they won't be able to crank out the chips any where near fast enough. Gaming systems like
PS2 will be flying off the shelves soon. Presently only about 2% of the world has internet
access, and that number is growing very fast - how many routers will we need? What about
the huge growth in hand-held devices? What about chips for cars, and medical devices, and
who knows what all.
Seems to me that semi-sector has already more that adjusted for any industry slowdown - real
or percieved.
JMHO. Appreciate any feedback. |
