What negativism? AMAT, NVLS, KLAC are currently at multiples (P/S, P/B) that (aside from the 2000 mania top) correspond to previous cycle top valuations, not cycle bottoms. These stocks have nearly doubled off their lows, and most investors seem convinced that the bottom is in, and a new upcycle has begun.
Were on the same page, Jacob, ....for those stocks. As I showed here Message 15846592 , it is precisely the large cap, well known names in this sector that are trading at absurd valuations. Perhaps they are perceived as safe havens. But if you examine many of the mid- and smaller-cap stocks, valuations is generally much more reasonable. The p/s of Klic (~1.2), for example, suggests that investors acknowledge that we are indeed at a nadir in the cycle, that downside risk on the stock is now greatly reduced, and a significant rebound from these levels would make sense.
In short, a sampling of most stocks in the sector other than AMAT, NVLS, and KLAC will show that valuations do represent a large degree of negativism. Thus, the smaller issues may be poised for a greater response to signs of a recovery than the larger issues.
[The overriding caveat here is that, in my experience, valuations in the equipment sector are a lousy benchmark to judge relative value. Judgement of all the factors occurring in a given environment, a measure that can neither be graphed nor easily debated, is by far the most important criteria for astute investing.] |
