Sparky - Here's a clip for our investment club newsletter on why the future looks good for FSII and other related companies, and some of the Forbes article in case you did not run down:
SEMICONDUCTOR EQUIPMENT OUTLOOK - "Demand continues to grow for semiconductor manufacturing equipment" according to the Semiconductor Equipment and Materials International (SEMI) trade group - with the August book-to- bill ratio being reported as a "healthy" 1.11, meaning $1.11 in orders were received for every $1.00 billed. According to the SEMI organization, the data reflects a steady increase in equipment orders.
A September 21, 1997, article in the Orlando Sentinel also had an interesting take on the semiconductor segment - the state of Florida is looking to attract new semiconductor facilities with various economic incentives - and the article notes that over the next five years over 50 semiconductor facilities will be built at a cost of $1 billion each. A significant share of that cost will be for semiconductor equipment, and the article notes that equipment must be upgraded or replaced every three years due to technological advances.
This boom creates a tremendous economic opportunity for states like Florida - and an opportunity for small investors who have invested in semiconductor equipment manufacturers like Model Portfolio companies Ultratech Stepper (UTEK), FSI International (FSII), and Align-Rite (MASK).
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FSI INTERNATIONAL (FSII). On September 22nd Piper Jaffray raised its rating on FSII to "strong buy" from "buy", stating the orders were accelerating and the company was set to book $100 million in new business in this quarter - the first quarter of 1998. In fiscal year 1997 ended August 31st the company has announced that it expects to report total revenues of $260 million. It appears that orders and revenues could begin to accelerate sharply.ÿ
FSII was also favorably mentioned in the October 6th issue of Forbes in an article on the Third Avenue Fund and managers Martin Whitman and Curtis Jensen. The fund has outperformed the S&P 500 by 3.5% over the last seven years - very few funds did better - with a risk 40% below market according to the article.ÿ
The article notes that Third Avenue was drawn to the semiconductor equipment sector because "the long term picture will be spectacular, with chips likely to be incorporated into everything from cars to credit cards." Third Avenue picked nine companies in that sector last year strong enough financially to survive the downturn, including FSII.
Forbes notes that "Jensen remains especially keen on FSI, a semiconductor equipment supplier that is trading at less than twice book value. The company's earnings lagged during capacity expansion. But, says Jensen, it has $100 million in cash against $40 million in long term debt. And he likes the management."
We concur. Recent announcements by Intel with regard to new technology involving flash memory, and by IBM with regard to technological developments allowing the use of copper in chip manufacture to improve performance, should enhance the outlook for companies such as FSII. FSII now has 2 strong buy, 2 buy, and 2 hold recommendations according to Strategic Investor.
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The entire write up is at members.aol.com - other stuff in it includes a summary of a Barron's article on why small caps will continue to do well - seems that earnings of small caps will outpace the larger companies by quite a bit according to the "experts", and Business Week had some free financial sceening sites on the web that are mentioned if you don't have a few bookmarked already.
Best - Joe |
