Quant:
1. "Inventory imbalances in ICs are rapidly correcting. In fact, there may be shortages in all semi sectors (telecom, network, PC) by 4Q '98". There is good evidence, recently, that your first sentence is true. But the second sentence doesn't follow. Inventory build-up has been solved because fabs that were producing at 90% of capacity in January are now at 50%. At the first sign of firming prices or increasing demand, lots more chips can be produced, without buying anything from AMAT (or even CYMI). How long will it take for demand to increase enough to put that capacity to use? Not this year, and maybe not next year. The only way for supply/demand to come into balance for DRAMs in 1998 is for arsonists to torch 15 fabs. That is, the capacity would have to be permanently taken out.
2. "Regardless of whether orders for CAPEX don't improve until mid-late 1999, companies with stature of AMAT will be viewed as using such a period for increasing market share via acquisition."
Everyone had the same view of AMAT in 1996, and it did nothing to support the stock price. It does no good to be viewed as increasing market share in an out-of-favor cyclical industry (take MU, for example).
3. "future demand is robust despite near-term conditions. The 21st century just isn't that far away." The 21st Century is exactly 17 1/2 months away. You might have a time horizon that long. I might. But Fidelity mutual fund managers don't. The stock won't go up until they (and people who think like them) start buying.
4. "Japan dealing with its problems" The Japanese are talking. They've been talking for 8 years, and have yet to close down a single bank. All the talk has, so far, produced no action. I'm not sure they are scared enough yet to start real structural reform. A big government stimulus will just create more public debt. The people are so cowed they won't spend more until confidence is restored, no matter how much money the government throws at them. Demand for chips in Japan is going to stay down for the foreseable future (at least through 1999). And how about demand for chips in the US? GNP growth may be negative in 2Q, and possibly the 3Q as well. Earnings growth has just about vanished. We're starting to hear the R-word.
5. "SOX index remains in firm upside trend " You need to have a very short time-frame (7 weeks max) to see an uptrend. I think you may be right about the semis. June may have been the bottom, although a lot of people think the bottom won't happen till the third quarter earnings come out. For the semi-equips, I see an extended trading range at best. I just missed shorting AMAT last time it hit 32 (it had already backed off). Next time I will.
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