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Technology Stocks : Semi Equipment Analysis
SOXX 299.81+2.7%Dec 19 4:00 PM EST
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To: Donald Wennerstrom who wrote (11371)9/2/2003 9:12:22 PM
From: Sarmad Y. Hermiz  Read Replies (3) of 95617
 
Hi Don,

First lets dispose of the non-sense that was going around earlier "sell in May and go away".

The flaw in that saying is that it doesn't acknowledge its model. Which is that when total year profit targets fall short, the shortfall becomes apparent during the 3rd Q. However, this time the profit targets are very low. So no misses.

Now on to my current market model. Stocks will continue to gain in price as long as forward quarter revenue and gross margin estimates are increasing. This hypothesis would be disproved if a company increased its revenue estimate and the next day the stock dropped.

If we agree that the fuel for the rise is revenue and gross margin increases, then the question is how much fuel is there? I will limit myself to estimating this quarter. My contention is that for every tech sector in the US markets, the majority of companies will report higher rev and GM in October. The anticipation will keep nasdaq rising through mid-October, and the after-glow will last at least another month.

Let's say there's already enough fuel in the tank to take us to nasdaq 2000. We may well get to the moon after that. But we have to check the fuel level again at that time.

The issue will be whether higher interest rates will derail the recovery. We won't know till we see where rates will go. I am not convinced that inflation can be avoided indefinitely. But I'm satisfied that to year-end, the Fed can keep rates low.

My accounts are still 100% committed to tech stocks. I have some absolute number goals - approx 20% higher than current levels. If they are reached, I'm likely to sell all and re-evaluate.

Now I feel sorry for the innocent shorts.

Sarmad
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