Hi John. Thanks for the thoughtful message.
<<I am thinking that AMAT is more of a blue chip now, and that is one reason why it might not go down there>>
I tend to use AMAT as a good example for valuing the Nasdaq, because not much has changed in its business situation since 1996. It was and is the unquestioned gorilla in a critical high-tech growth industry, with a high barrier to entry, which just happens to be highly leveraged and deeply cyclical.
Even if the P/S does not drop below 2.0 this time, bear in mind that the Sales denominator may fall as much as 30% before this downturn is over. I will be really surprised if AMAT is not a teenager sometime between now and mid-2002.
<<Another might be the difference in interest rates between now and then. I am not sure how much of a difference that was, but that certainly could be a factor.>>
Message 15631807
<<Off Topic: What confuses me even more is why stocks like MSFT are holding up so well. I realize their earnings have held, but I don't know how they are managing that, given that Intel has not been able to accomplish this.>>
One of the reasons I am short-and-hold on the Dow right now is that it gives exposure to the non-tech sector, which has not corrected downward AT ALL yet, plus as a bonus you get a short on MSFT and IBM.
Both companies are being viewed as recession-proof, essentially because they manage their monopoly positions (enterprise servers and Windows respectively), and their monopoly earnings, very well. INTC, on the other hand, has serious competition from AMD.
But neither of them can escape the unfolding generalized recession, and neither of them can command ridiculous PE's for little or no growth indefinitely.
<<I am not sure if the 1.2 happened in 98 or earlier.>>
1996. The 96 trough was lower than 98.
<<even if you bought quite a bit above the bottom. That is one interesting fact about the great companies over time, you did not have to buy at the bottom. But in tech of course one needs to be more careful since the volatility tends to be extreme.>>
I agree to some extent. But the present tech collapse is a bubble deflation, and we haven't had one of those since 1929. IMO, not buying too soon is absolutely critical this time around. Tech stocks may wander around in a depressed trading range for years now because (a) the economy has to work off historically serious imbalances in industrial overcapacity, corporate and personal debt, personal savings, etc. etc., and (b) it looks like we will have the first worldwide recession in a long time... no engine to pull everybody else out of the mud, and (c) the public will likely be disillusioned with tech stock investing for years to come as a result of the crash.
It would not surprise me to see AMAT drop to 15-17, then trade between 15 and 40 for 3-5 years from here. |
