Semi-OT:competitor LLTC gets some short interest.
ADI gets some mention.
interactive.wsj.com
...If recent past is indeed prologue, the place NOT to be, contrary to the suddenly revived bullish chorus and the knee-jerk moves in recent rallies, will be big caps. Accordingly, why Mort Cohen remains resolutely bearish on quite a few of the breed merits passing along.
Mort runs a Cleveland-based hedge fund called Clarion Partners, which is up 8%-9% this year, after rising 48% last year -- a sparkling performance that's explained in part by Mort's old-fashioned notion that a hedge fund should be hedged......
...Semiconductor stocks soared last week on the widely-publicized pronouncement by Salomon Smith Barney Barney's semiconductor guru, Jonathan Joseph, to the effect that, "things are so bad, they can't get worse and so will probably get better."
Count Mort among the dissenters.
"The downtrend," he insists, "is likely to be longer and more severe than people think," not least because chip prices are due to take a fall. (For the gory details, see Up & Down Wall Street.)
Linear Technology, a maker of high-performance linear integrated circuits, is one of Mort's favorite shorts. It's also, we should note, a company with a superb track record and stunning financial ratios.
Because Linear offers proprietary products, gross margins last year ran 75% and net margins, 40%. Over the past decade, sales have grown an average 25% a year and earnings per share, 35%. The company is debt-free and throws off slugs of cash.
No wonder it has been an institutional darling -- with over a quarter of its stock at yearend owned by three large firms, including a 12% stake by Janus Capital.
Linear's earnings were still sizzling in the fiscal first half, ended December -- up 75% on 60% higher sales. But the company did note a slowdown in bookings and some cancellations, Wall Street estimates are edging down and the stock, at 41, is well off its $75 high.
But in Mort's view, it's still far too expensive. No way, he figures, Linear will meet the consensus estimate of $1.35 a share for this year, ending June. A competitor, Analog Devices, he notes, just last week warned Wall Street of slowing orders and "significant" cancellations.
And major markets for Linear's high-tech analog stuff -- telecommunications, cell phones, networking equipment and computers -- are not only far from robust but awash with inventory. "Pricing has yet to deteriorate on analog," he shrugs, "but we think it will."
Linear's stock market value of roughly $13 billion is a steep 14 times sales, 8.5 times book and 30 times the generous estimate of earnings for June 2001.
Before the cycle's over, there's no reason, Mort reckons, that Linear couldn't sell at four times book and six or seven times sales, as it did in the last trough. His target: $20-25.
Jim |
