WM SHARP -
I had the opportunity to read the response by Raimondas Lencevicius prior to posting this response. My options play has been close to that of his. I went 25 options for Oct 30/35 and Jan 30/35 for a total of 100 calls. Balls move but I had to do it. I also went long many thousands as I see this as a gift.
I am due to be wrong at some point and I have set myslef up for a dramatic come uppance here. However, this retreat in WFR has got the following going for it.
1. Price is well below the last times I bailed out of this stock. I did not get a chance to sell at the 38 range but I was protecting profits from 33-37. I still have some shares but not a whole bunch. Now I have a whole bunch !!!
2. I view this much like the 2 NVLS retreats for the initial lawsuit filing by AMAT and the recent damage award. Both times NVLS tanked only to skyrocket up again. WFR won't skyrocket but will see 35 soon.
3. Over reaction to the earnings since there was close to a 250,000 block sold within the first 400,000 shares traded that may have started this debacle.
4. One of the institutional specialists for this stock is absolutely terrible and is partly responsible for this, IMO.
5. The analysts for this stock have had a hell of a time with earnings. they raise, then lower(over lower), raise again, and then lower.
6. The comments about the dollar against the yen were intriguing since the 1996 annual report shows the Asia/Pacific Region accounting for only 10% of revenues. Most of WFR revenues are derived from the USA with Europe a good second place. Pardon me if I discount the yen.
7. INTC has the TX plant being built and should most likely use wafers from the recently qualified Sherman TX facility.
8. While the earnings were lackluster, let's look at them a little more closely. First we are admittedly coming out of an IC slowdown and things have just started to ramp up. IF we believe what we read, the IC guys are about to come intro their own once again. This means more wafer starts, which means more wafers to be purchased. Couple this with the new expansions coming on line or the 8" conversions coming on line, and you have increased revenues for WFR. Second, WFR has 2-4 (I think 3) new manufacturing sites (joint ventures) that were cash flow drains not running at full capacity or coming on line or being qualified. All three scenarios affect Cost of Goods Sold and higher operating expenses for underutilized sites. As this changes ove the next few quarters, I see a double positive. I seen more wafer sales and higher revenues at the "expense" of lower Cost of Goods sold and lower unit cost. This becomes a dramatic reversal of fortune, in my book.
9. Due to the nature of the IC business, WFR experiences gluts or shortages. When wafer availability gets tight, prices rise and allocations go into effect. It gets nasty out there fighting for wafers to put into your fabs. When it gets bad enough, the wafer providers expand their operations. This takes time and a great deal of money (close to 2 or more years). They do not bring onboard small incremental increases in capacity but rather large expotential increases in capacity. When this occurs, you create somewhat of a glut until incremental IC demand moves up to parity with supply causing another shortage. I have live through a few shortages.
10. Relative to the above, this recent round of WFR expansion was done based on the expected growth in the IC industry 2 years ago. Guess what happened?? The DRAM debacle occurred and screwed everyone, especially the wafer providers. Hence, underutilized facilities and new unnecessary facilities that have to sit around for the next spurt in the IC arena. I thought we have been led to believe by all the analysts that we are getting ready for another spurt in IC processing.
11. Now we have a contradiction because of the above. 3 or 4 analysts have downgraded WFR. Good move, guys. Downgrade after the massive dump. To me that means they want to shake out more shares before going on a buying spree to load up inventory on the stock. That way, when the stock goes back to 35, we can upgrade the stock and sell off the inventory (What a concept from the skeptical one).
12. If the analysts are correct, it may be time to head for the hills with all the IC manufacturers since lower wafer demand will mean lower die output by the IC manufacturers and hence, lower revencues and earnings from fabs running under capacity. But wait!!! We had a great run up on the equipment stocks this past quarter. I see it all clearly now. The lead time for most of these equipment stocks are close to 6 months and all the deliveries now that have boosted these stocks were in anticipation of a massive SLOWDOWN in the industry. Now it all makes sense. All the equipment was purchased so they would NOT have to expand IC manufacturing capabilities. The equipment is being purchased to stand idle during this downturn.
Wafers ARE a commodity just like oranges. Any Tom, Dick or Harry can plant trees and grow oranges. You might even get your first crop in 2-3 years. However, not every Tom, Dick, and Harry can fork over hundreds of millions of dollars to build a Wafer manufacturing facility on the chance that, when completed, they can get qualified by a group of customers. The qualification process is long and expensive. It is bad enough that, when a company like WFR brings a new facility on line, they are forced to gothrough rigorous qualification with the existing customer base. BTW- WFR is the second largest producer of this commodity product.
[Throw the bum off his soapbox already] [Yeah, get the bum outta here]
Okay, as usual, I put it on the line for all to see. I am in and content with my position. IF WFR drops some more, it's like UTEK; time to average down. IF everyone bands together on SI, on all the threads (please no spamming), all 60,000 registered members could accumulate this stock next week and become a formidable force to be reckoned with as WFR makes its comeback. What if we all circled the wagons and the institutions found us vying for the same shares and we got them. Next run up on the stock would have us selling into it instead of them. Whoa, talk about your conspiracy. I only advocate this since it is the prime building block of the entire semiconductor industry. Without it, all else is not worth a hill of beans.
Let's see, 500 shares for each member = 30,000,000 (Whoops, only 41,000,000 are outstanding giving us 75% of the float). What a trip if we have all the shares and the MM got left holding the bag. We all have to be real shifty and quiet about it. Those with last names A-E you buy on Monday, F-J buy on Tuesday, K-O on Wednesday, P-T on Thursday, and U-Z buys on Firday. nobody will ever know. Key point is to tell no one and no one is allowed to sell their shares until next month. Let them sweat. The MMs aren't the only ones that can manipulate stocks.<GGGG>
Andrew |
