re Maturing of Semis/Equips:
1. I've been thinking this a while. It's why I constructed my "Tech Dividend Portfolio":
INTC, LLTC, KLAC, XLNX, AMAT, TSM, TXN, COHU
Message 27451146
compare it to my "Semi Growth Portfolio" :
Message 27206121
AIXG in LED equip
ALTR in programmable logic
ARMH in SOC
ASML in lithography
CYMI in lasers
KLAC in metrology
KLIC in bonding equip
LRCX in etch
VECO in LED equip
XLNX in programmable logic
2. Companies like QCOM, MSFT, and CSCO don't make either list, because they are big and mature enough to pay a dividend like INTC, but their management is insufficiently investor-friendly. Their cash flow tends to get wasted (= not returned to shareholders) via failed acquisitions, failed attempts to enter new markets, or employee stock options. They are too big to be likely to grow (either the company or the stock) much in the future. I would rather hold XOM (Exxon) or KMB (Kimberly-Clark) than QCOM or CSCO.
3. In a maturing industry, investor-friendly management is an absolute requirement for any long-term investment. An investor-unfriendly management can ruin any stock, no matter how many other positives a company has. It doesn't matter how well they grow sales, profits, or cash, if none of it flows to shareholders.
4. Semi-equips are just as cyclical as they always have been. The last downcycle was as nasty as any in the history of this industry. Has everyone forgotten, that semi-equip bookings troughed at 246M$ in March 2009? Where is the evidence that capex won't be as wildly cyclical in the future, as it's been in the recent past?
5. Cycle tops are marked by investors thinking:
corporate managements can predict the future (better than they ever have before)
and therefore
high semi capacity utilization is now permanent
pricing power is permanent
severe over- and under-capacity will never happen again, and
profit margins will remain high forever
6. The S&P500 has been in a horizontal channel since 1997, and we are now near the top of that channel. The double tops of 2000 and 2007, and the double bottoms of 2002 and 2009, define the channel. Therefore:
7. Short-term trading, of semi-equips or anything else, should have a bias towards shorting rather than going long, till the next recession trough. Longer-term long positions should be fully hedged or sold.
8. I can't predict the future either, so everything above could be wrong, and I must never forget the long tails of the bell-shaped curve. |
