I didn't get a chance to track what happened here in the last couple of days, so I am delighted to see this old dog starting to move. I have a couple of thoughts after reading the postings here. First of all, a lot of the fervor in this sector is being caused by the recent press releases of a lot of new fab investment world wide. Having observed this in the past, there seems to be quite a herd mentality in the management of the semiconductor companies. ie if they are going to build a new fab, we better too. It's a classic keeping up with the Jones. The second thing is that in such an upbeat environment the rumors and bullishness will go nuts at the Semicon West show which starts Monday. This is the mecca, and if you haven't ever been there, any of you would find it amazing. The first time I went it reminded me of the gold rush. Money everywhere. Scads of multimillion dollar machines. Companies you never heard of two years ago with new whiz bang stuff. Definitely a high. A lot of this boom in prices is in anticipation of announcements at that show. New fabs. New orders. New equipment. Mergers. etc. A lot of deals are conconcted at that show, because everyone is there.
Also, I wonder what Dataquest has been saying lately. Or VLSI. It is their forecasts that drive the earnings predictions. Because it is their forecasts that the companies use to model their next year's revenue forecasts. DQ will estimate the electronic device demand which drives a silicon forecast which drives a capacity forecast which yields a new fabs forecast which drives an equipment expenditure forecast. I haven't seen releases for a while, and they usually give an update at these major trade shows, so if it says the industry will grow at 30 percent, FSI will say ...well we better grow at 35 percent because we are better than the other guys, and they will plan their business model for that growth which will result in a $400 million company that earns $2-3 a share all of a sudden. These numbers are all hypothetical, but as Joe points out, there is a lot of leverage available. With FSI's equipment set, if a single fab used all the FSI stuff that is avialable, FSI would get a $50-60 million order. About 20-25 fabs get built every year, so you can see that if these boobs could ever get their act together, they could really put some numbers up on the board.
So I would hang in there right now while the emotions are high, and look for the industry forecasts.
Hope some of this rambling makes sense.
"the bull" |
