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Technology Stocks : Full Disclosure Trading
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To: Rick Storm who wrote (343)4/27/2002 1:49:09 PM
From: robert b furman  Read Replies (1) of 13403
 
Hi Rick,

I think it is important to keep in mind that Semi equip mfrg stocks were the first to fall out of bed.As a group these stocks had plummeted quickly and first bounced in October of 2000.They once again had a hard downward bounce in April of 01 and a final third slap back down to Oct 00 lows in Sept 01.

Many of the headline stocks that are hitting new lows now were the last rotation of winners in the last days of thew 00 distribution top.That makes them the last sector to experience the final shakeouts before The Bear is Dead is declared.

I think that is what we're seeing now.

The semi equip companies are experiencing initial orders from those top shelf companies that know continuous improvement is the only way to survive.These are new technology buys that through yield enhancement and production efficiencies better margins are maintained.

This does not mean a widespread capacity expansion is going to occur - however the laggards will be forced to keep up and that will conmtinue the business environments improvement.

The semi equipment stocks historically are the leaders.The long time cycles to implement their technology enhancements require action prior to the economy proving itself.

Although difficult and often tenuous one has to believe that the past cycles will reappear in the future.An awareness of the historical past is helpful in maintaining the Belief.

Additionally due to the tremendous swings created by excess capacity AND technological reinvention - these companies boast bullet proof balance sheets - most often featuring hordes of retaining earnings in the form of cash or highly liquid investment and NO DEBT.

These companies are a bastion of transparency in accounting and have historically been wonderful providers of business matrices like orders,booking,backlogs with quite credible forward visions except when the backlogs go the way of cancelations and pushouts.

To assign a higher multiple because they are debt free,straight forward in their accounting practices, and have high commitments to R&D that regenerates the next cycle and need for their equipment is the market actually operating quite logically.

I for one have always felt these companies deserved a higher multiple than they were given - simply because they are viewed a volatile and cyclical.But that's just my opinion.

Hope that helps

Bob
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