I don't think we're there yet, either. Looking at the historical
highs and lows of ratios that are downside "value barriers", there is
a scary amount of downside left, considering the negative Asia
related sentiment, if not panic:
Price/Book Price/CashFl. Price/Sales
Low High Low High Low High
92 1.3 3.2 8.8 21.4 0.7 1.9
93 2.1 5.4 9.5 23.7 1.0 2.7
94 3.1 4.8 11.2 17.0 1.6 2.6
95 1.8 6.1 6.1 19.8 0.9 3.0
96 1.6 3.5 5.2 10.8 0.9 2.1
97 2.1 6.9 9.6 30.3 1.5 4.9
Now 3.3 14.5 2.3
(boy, are these tables a pain to get right)
This clearly shows us how extraordinary the 97 bull run was, and how
much downside there is if pessimism leads people to believe
that Asia related business is about to evaporate.
I got out too early this year and started nibbling at EGLS (too
early, again) because its price to book started to look attractive. I
am waiting now until AMAT, the industry leader, has clearly touched
bottom. We may see 20 (pre-split 40, which was an important support
level), and we may see 15.
I can't help but to remember the old saying: it's never too late to
short a stock... Playing the short side of the semis would take some
guts right now, but might be the right thing to do.
Any comments out there about the level at which we should see bottom
(price-to-book, price-to-sales)?
Looks like a trading strategy built around these ratios would have
generated some nice profits (hindsight...).
Robert
P.S. We may also want to speculate about the effect of lower capital
spending in Asia on DRAM capacity utilisation, and therefore prices,
1-2 years down the road??? |
