This scenario is similar to the Nasdaq bear market of early 1997, which dropped the Nasdaq nearly 20% over a few months. It's complicated here by sharp drops in stocks due to cos that either truly have Asian exposure, or are blaming any problems they have on Asia. This is causing panic and margin calls...and in general, ignorance of any fundamentals, P/Es, etc. To me, this whole thing appears to be creating a surprising crop of "quality high tech companies at IPO prices."
The difference here from the earlier '97 bear market is the Nasdaq drop is happening faster. And, it's defying rationality even more. I personally don't buy the fact that this kind of thing will continue for months. Basically, there's too many companies trading at incredibly low multiples...for example, I can think of several US hi-tech companies with cash that currently trade at multiples lower than some foreign companies which are in troubled economies.
Further, there are contradictory assumptions which are dropping stock prices. First off, look at the stock prices of semi cos and semi fab cos falling at the same time. If Korea is so financially damaged that it can't update semi fabs -- and this is likely -- how will it remain competitive with the US in this area? And, won't worldwide semi fab capacity plummet? (By the way, I follow the Asian newsfeeds and I've noticed the debt rating of the Asian semi cos has gone WAY down) Imagine what a wonderful position this puts US semiconductor companies in as they are not confronted with severe debt problems or local hyperinflation, as some of their Asian peers are. No wonder a few of the smartest semi cos have announced stock buybacks. The bottom line is the Korean semi companies are going to have all kinds of financial and logistical problems which US companies won't. I am already seeing direct evidence of this.
As for MRVC, we all need to focus on the long-term. Whereas we know they sell to Korea and Japan (as do many hi-tech companies), we also know they are gaining market share. The stock price has dropped from 39 to 21 which would seem to take uncertainty in this area into account. But then again, valuation doesn't matter in these types of bear markets.
Dan. |
