re: semiequips:
if you think they are overvalued and business conditions aren't going to improve soon, why short SMH (a semi, not a semiequip, index)?
Shortterm, the trend seems up for all the semiequips. In mid-April, many broke above a trading range they had been in since last November. The stocks are going up, while industry conditions get rapidly worse. Why?
The reason seems to be that lots of investors are anticipating a rebound as sharp as the recent downturn. That's what happened in 1998, and the quality semiequips (AMAT, NVLS, KLAC) were all 10-baggers from the late 1998 low to the early 2000 high.
INTC's capex budget is a response to AMD becoming a real competitor, and it's also a bet on a rapid rebound in demand for their chips. If we get a recession in 2001, or stagflation in 2002, as all that capex spending comes on line, Intel is going to be hurting. That's their gamble, and they have the cash to make bets like that.
IMO, there is a real possibility that chip demand (and semiequip orders) don't rebound this year. Also, even if demand comes back, there is no way the semiequips are 10-baggers off the late 2000/early 2001 lows. Those lows were at much higher valuations than the 1998 lows, and the stocks have doubled off those lows. So, IMO, they are already pricing in most of the next upturn.
So, I'm planning on buying a bunch of NVLS puts, but not yet. Sentiment and the charts are too bullish. It will turn, but not yet. |
