I saw this on the SFAM thread. Mr Sam is very wise.
To: +TEColeman (2083 )
From: +Mr. Sam
Tuesday, Oct 21 1997 9:45AM EST
Reply #2087 of 2092
<<Mr. Sam, Haven't heard from you in awhile. Any thots on today's move?>>
Let me comment on the recent weakness in SFAM and why I think we'll see some
short-term strength soon. The weakness was due to the following factors, IMO:
1) SEMI announced the equipment book:bill, which showed three straight monthly
declines on a seasonally-adjusted basis.
2) Several companies missed earnings estimates including AMD, INTC, LSI, and
others. There was also continuing talk about weakness in the memory disk/disk drive
sector. This customer weakness started a correction in the whole sector, a correction
that hit SFAM and all of its peers.
3) SFAM was trading at its all-time high valuation when looking at trailing numbers.
P/S peaked at 5; price/(cash flow) at 32.3; P/B at 6.3; and, P/E at 37. (All of these
numbers are calculated using the trailing twelve months ending 8/31/97 except book
value, which uses the 8/31/97 quarter's number.) It was trading there on expectations
of an outstanding 1998. As those expectations came into question, the valuations were
hurt a bit.
Why may the weakness be nearly over?
1) The stock traded down to some weak support around $47. The next decent
support is at $40, and we may get there yet before this correction is over, but so far,
the ~$47 support seems to be holding.
2) With the correction, the valuations have returned to more moderate levels. Right
now, the P/S is 3.35, P/B is 4; P/E is 29. (Again, numbers calculated using the trailing
twelve months ending 8/31/97 except book value, which uses the 8/31/97 quarter's
number.) Comparing SFAM's valuations to its peers, it is clearly priced attractively.
3) There is still good news about the sector's prospects in 1998 and 1999. There was
a lot of talk at the Microprocessor Forum in San Jose last week about accelerating
process development. This will benefit all CMP manufacturers. Intel, Samsung,
Siemens, AMD, and others continue to invest in new fabs. Samsung is buying 350
tools (of all kinds) to equip their 125,000 square foot facility in Austin--the largest fab
in the country. Their oxide polishers are being purchased from SFAM.
4) On a very short-term basis, the good earnings from IBM and MSFT may provide
some support for the tech stocks today. |
