well the thing is, if Fred Hickey is saying he is buying AMD on "fundamentals", then I would say that is about the same bet as buying amazon though, because the real value players reject the P/S notion completely I thought. AMD is slightly less than 2x sales.
Your statement has a number of errors. When Barrons ran the article making the case for AMD along with the opinion of Fred Hickey, (which subsequently sent AMD stock price soaring imo) it was August 18th, and the stock price had closed the preceding Friday at $7.80. It was selling at 1.2 times book and 1 times sales and even now is selling at only 1.45 times sales at today's 52 week high. This a far cry from your stated "2x sales" for AMD and is even further from Amazon's 4 times sales.
online.wsj.com
In Fred's not-so-humble view, the new AMD line "is the most significant threat Intel has ever faced." If he's right, shares of AMD look awfully cheap at 1.2 times book and one times sales. In sharp contrast, Intel's stock fetches five times book and six times sales.
The above Barrons' article makes an argument for why AMD might be a rational buy at or below that $7.80 price based on expected future market share and future profit margins that AMD's new products might be expected to garner. This is not the same situation at Amazon at all. I have never seen anyone make an argument or case, and seriously doubt anyone could, why Amazon, with its negative $3 per share book value and 4 times trailing sales valuation, might be worth its current valuation, or even its valuation six months ago, based on an upturn in expected future performance of the company.
Even the professional that was quoted as buying tech stocks in the WSJ article, that I posted earlier today, said he was shorting Amazon and Yahoo earlier this year, at much lower prices, but switched to buying tech when he saw the trend change up. Again, I doubt many professionals, unless their financial analysis skills are sorely lacking, see fundamental, intrinsic value in many tech stocks, but they are willing and happy to play for a good rally, momentum and sentiment, just like many on SI are. There is absolutely nothing wrong with that, especially if you can successfully get in and out on time, but it doesn't mean that many of these businesses are not grossly overvalued from an intrinsic, fundamental value point of view.
And with regard to Fred Hickey, he is still very bearish on tech stocks in general from a fundamentals perspective according to Barrons: (Fred) has been a ferocious bear, an uncompromising disbeliever in the rally ("a speculative orgy," a mini-mania powered by "liquidity-fed stupidity"), very much down on technology stocks in general ("grossly overvalued") and semiconductor stocks in particular ("the worst of all!").
JMO, Huey |
