Your welcome.
I would advise to keep a very open mind in your approach to this sector. Dogmatic responses to current conditions and/or common wisdom can often result in below average returns. Your belief in upcoming selling, or the now oft-repeated conjecture that 'this time is different' are just the sort of short term prognostications that can result in poor investment choices in this sector.
We may have selling (or buying) in the near future and this may not be a typical semi-equipment down cycle. However, my experience is that these are risky, if not foolish, investment principles to apply at any time for these stocks. You should not listen to me or anyone else who claims they know either the reason for the current state of the industry or 'typicality' of the cycle (there were numerous folks who claimed, last winter/spring, 'Today, we do not have a typical semi-equip up cycle.' and then proceeded to explain in compelling detail why the strong order growth would continue through 2003).
And keep in mind for every CEO or analyst referencing a vowel to characterize this cycle, there is one to cite a pointy-bottomed consonant. For example, ChipPAK is a major client of Kulicke and Soffa. A couple weeks ago the Thomas Weisel brokerage upgraded the stock to buy and noted 'improving order stability, believes the worst is likely over; says current quarter represents the fundamental bottom for ChipPAC and sees sequential growth for the rest of 01; although ChipPAC saw the downturn earlier than the majority of its peers, believes the Company is likely to be the first to emerge.'
Klic also 'saw the downturn earlier than the majority of its peers', thus is may also 'likely to be (one of) the first to emerge.'
In my earlier post, I noted that AMAT, NVLS and TER (add NVLS) were 'no brainers' in this sector. I would advise to keep a very open mind about this assumption as well. Most folks will recommend these stocks to a novice in the field. Leadership can change very rapidly in this industry; former leaders (given high multiples) can be left in the dust during a new cycle if they can't regain their former high growth rate. In fact, while these four stocks may be 'no brainers' it is precisely because of this growth rate issue that I am avoiding them.
I started a portfolio of equip, stocks on 9/28/00. Here is the performance through the close today:
LRCX +36.1%
KLAC +12.2%
KLIC +8.9%
TER +1.3%
NVLS -1.1%
AMKR -14.2%
AMAT -18.4%
ASML -23.8%
Group +0.1%
Best wishes,
Scott |
