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Technology Stocks : Semi Equipment Analysis

SOXX 348.51

+5.3%

Feb 6 4:00 PM EST

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To: Cary Salsberg who wrote (11339)	9/1/2003 1:59:39 AM
From: Sam Citron	Read Replies (1) of 95888

Take profits and move to quality as the recovery unfolds. My impression was that recovery starts with quality outperforming because investors award these companies a safety premium and memories of the previous bust are fresh. Then as the recovery unfolds, investors start to loosen up and chase performance in more speculative ventures. Finally at the peak, companies with unsound business plans and sexy names are able to float stock to a naive public that doesn't even bother to read the prospectus. Therefore it seems to me that if the valuations of very speculative stocks are stretched relative to the more conservative names, we may be closer to a peak than some might realize. And once the peak has passed, quality shines on a relative basis, but not in absolute terms. So when junk starts floating to the top, I tend to view it as one of the first signs of a frothy market. I might buy one or two of these less conservative names so as to be "in tune with the market" even while I keep alert for red flags signaling that the music could soon stop. My finger inches ever closer to the sell trigger as my portfolio becomes less rather than more conservative.

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