Hi Michael,
It's me again. :-) Re: valuation of tech stocks.
I use PSR and requirement that the company is
a leader in its field. The "field" is loosely defined.
If I don't know the field, then I look for absolute leaders
(e.g. INTC-MSFT-CSCO). If I know the field, e.g. semi-equips,
I subdivide it into smaller subfields and look for leaders
there. I also avoid any commodities (DRAM, DD, etc.).
Going from there, the TOP THREE (INTC-MSFT-CSCO)
were never cheap enough. Let's look at the subfields though.
Software: ADBE - leader in PostScript, PDF, etc. Pricey
but getting there.
Hardware/peripherals:
APCC - leader in UPS, surge protection.
Was cheap in 1996. Pricey now.
ADPT - leader in DD controller cards. Still pricey.
Networking: LU - was cheap after spinoff. :-(((
Semi's: Non-commodity semis: XLNX, ALTR - pricey.
Semi-equips - my favorite area. You must
understand that semi-equips are growth-cyclicals and must
be handled as such. There's an absolute leader - AMAT.
Then there are subleaders: ASYT, CFMT, COHU, CYMI,
EGLS, ESIO, HELX, KLAC, KLIC, PRIA, SFAM, SMTL, TER,
UTEK.
Each of these companies have a good track record and
consistent growth in the up cycles. Most of them have
no long-term history though.
The strategy with semi-equips is to buy them
when everybody hates them - which was last week.
I also agree with your "double bottom" buying strategy.
They have to be sold as soon as they reach high
valuations, because the cycles are unpredictable and
each down cycle carries the whole group to the gutter.
Is there a sense of buying multiple stocks vs.
buying AMAT? Most of the time there is not though sometimes
other stocks get more mispriced than AMAT.
Finally, I think we might still see a big drop
in semi-equips. SEA is still uncertain, though is being
ignored more and more. You still may get SFAM @ < $24.
Good luck
Jurgis |
