MB:
Wonna know your opinion on buying puts on Semi Equipment stocks.
Positive:
1. The group has shown strong relative strength during the current market weakness. Sector rotation cited. Many brokerages are touting that the group has bottomed. The problems are "priced into the stock". The market in the near term may bounced back, and techs are favorite momentum stock.
2. AMAT is due to Aug 11, and management is likely (given their history) to give out optimistic comments about the "turnaround."
3. Industry is the midst of consolidation. And 4Q is traditionally a strong season.
Negative:
1. As you have repeatedly asserted, the group's fundamentals are in for both cyclical and secular declines. Billions of $ have been spent in the last upcycle, and the subsequent overcapacity is driving end products pricing to collapse. >50% for PCs, VCD, etc. A full blown capacity expansion isn't likely when Siemens has just decided to closed down one of its newest factory. Moreover, many electronics like other previous growth industries, are showing signs of maturity (at least much slower growth) of in terms of penetration and functionality. The coming uptrend is likely to be slow and much less profitable when compared with previous ones. And if the economy does slow down...
2. The group's leaders are actually trading very close to their 1998 high. AMAT is at 36 1/2 (1998 high 39) NVLS is at 42 1/2 (1998 high 49) MU, your favorite, is at 35 1/2 (1998 high 39). So much for the "bottomed" argument. Although individual smaller names are indeed crashed.
3. Market risk
On buying put, how much further do you see the current bull run extending? So what are your picks for short term puts and Leaps?
BTW, thanks for your GTW put post last time.
Guy |
