I can't argue with your comments. It really is financial perception vs a technical perspective. IF we were all to invest wisely, we would look for the best possbile financials and low PE multiples as one of a few approaches. I did this with DPMI vs PLAB and it paid off. DPMI rose more than PLAB dropped to get parity in PE ratios.
My whole commentary is based on technology moving on and those that do not stay abreast of it and keep current will find themselves at a severe disadvantage.
I admit to being too close to the heart of the industry and may have my vision clouded by what the future has to hold. obviously, as we look at today and the retracement that IS occurring, my vision is not being shared where it counts, stock price appreciation. More and more it is looking like I am early to the party and will wind up sitting on the portfolio waiting for the market to postively reflect what is going on in the industry. What this means is that it is conceivable I will have some dead money for awhile and that when the time comes, had I waited, I might have picked up 10-20% more shares with patience.
However, I do buy down and average when share prices drop. that has been a blessing to me especially recently with ALYD. ALYD was purchased in the low 20s and then fell to 11 where I double loaded my shares. When it broke 20, I sold out with an overall profit. I got back in again at 15 1/2 which does not look smart at this juncture.
My enthusiasm is based on 2 fundamental observations:
1. Many of the major equipment and IC companies are sitting on record cash reserves and have announced stock re-purchase plans. This situation, coupled with market conditions today make it a fertile environment for the following:
a. Another round of consolidation in the industry with mergers and acquisitions. The is going to be required, IMO, anyway, since the R&D costs of going to 300mm equipment and processing is going to be costly. Look at the reported cost for the new MOT plant in Virginia.
b. Mergers and acquisitions could be accomplished with cheap stock and/or possibly lower cash now as opposed to when the sector prices are extremely high. In other words, great "Blue light specials" if you are sitting on cash or can buy up companies with depressed stock.
c. Healthier and stronger existing companies as share repurchase plans use cash rich reserves to increase shareholder value. IF I were AMAT, I would definitely buy back as much of my stock as possible with the record cash reserves they have and then refloat the shares down the road as the stock approaches historical highs.
What better investment than investing in your own company or making strategic acquisitions or mergers.
2. This next generation of device technology seems to have caused multiple perturbations in the normal semiconductor tech cycle. This new round should be what is dubbed "forklift technology".
a. Use a forklift to remove equipment that will no longer be able to run the required processes or the size wafers required.
b. New processes that required new Types of equipment that were not in place previously.
c. New feature sizes that require new types of equipment (DUV lith, CMP, MeV, CFM, P-GILD, Copper, etal)
d. New wafer sizes that require a new generation of equipment to handle the manufacturing process.
e. New equipment for the mask making industry since existing equipment is being pressed to its functional limits.
f. New facilities and expansions to meet the expanded use if ICs in the marketplace.
g. Facility upgrades just to remain competitive with existing competitors in both yields and COO or reliability and product offerings.
I may not have said it impressively but too many things are happening at once in the industry. I have been in this sector for over 20 years and have not seen such convergences all taking place at the same time. It is either a horrific chaotic debacle in the making or an expotential explosion in the evolutionary path of this industry.
Andrew |
