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Technology Stocks : LSI Corporation
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To: sea_biscuit who wrote (10370)3/2/1998 6:25:00 PM
From: shane forbes  Read Replies (1) of 25814
 
Dipy: Different theme. Those are steady growth companies that have seen the P/E ratios go up very high relative to growth rates, i.e., very likely can make a logical argument that they are overvalued (ala Peter Lynch).

The semis are a different type of group entirely. I no longer pay that much attention to deeply cyclical companies whether they are growth cyclicals or not. Product cycles are much more important.

That thing I posted sometime ago about exponential demand in the S curves highlights just how explosive and relevant product cycles are.

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(To be very brief:

an exponential function has the property that the % change in sales is independent of how much sales you are at.

So if I have a 100 million sales in 1996 and 150 million in 1997 for a 50% gain in 1 year, how much do you think sales will be in 2000 assuming the same growth curve (big assumption granted)?

Around 500 million - a huge increase. (The Compound Interest function is likewise an exponential function and behaves the same way.)

Now if you are a semi company those fixed costs just got spread out immensely and you are literally minting money. (Trick is to get ahead of the competition and hope that demand is huge. Then golden. Suspect digital consumer electronics is one such area and LSI is well positioned.)

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Shane.
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