Formerly About Applied Materials Message Board

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Politics : Formerly About Applied Materials

AMAT 226.05

+1.3%

Nov 14 9:30 AM EST

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To: Big Bucks who wrote (25149)	10/9/1998 10:56:00 PM
From: KLINVESTOR	Read Replies (2) of 70976

Big Bucks, Using PEs in a wildly volatile market like semi-equips is illogical since the reverse logic can be used when looking at some of the smaller cap semi-equips like Cohu which is trading at a 4-5 trailing PE. How is that justified? Cohu dominates their niche and yet has such a low PE. The reverse is true in looking at the downside earnings expectations of the next 12 months. My point is trying to value a semi-equip on a 12 month PE is irrationale. I do believe that AMAT is a bit expensive given the valuations of the smaller niche players in the industry but a 12-month PE is not the way to determine that. Ultimately, you have to look at future earnings expectations and the comfort of a big cap stock like AMAT versus the alternatives. I got a lot of "so what comments" when I posted a few weeks ago that semi prices were strengthening so I thought I should go ahead a hear the same again now since once again they are strengthening as follows: smithweb.com smithweb.com My point is still the same which is I believe that the pessimism is so strong in this segment right now that everyone is ignoring the improving signs we are seeing. Yes prices have dropped dramatically over the past year for the DRAM but the capital expenditures in this industry have dropped dramatically also. I believe the seeds are being planted for a very big rebound since additional demand drivers are around the corner like a new version of NT (with significant requirements), year 2000 upgrades, increasing demand even if it is in lower priced PCs, and even the current debacle in Asia will ultimately feed the rebound. I believe the Asia situation will feed the rebound since a lot of upgrades are being deferred there and technology keeps marching forward. Once these economies get their act together they will have to upgrade most computer equipment since this has been delayed recently thus feeding a significant demand increase in a few years. Yes things look pretty bleak right now in the market but underlying the soft stock market is the very low interest rate environment and a significant increase in liquid assets (money market fund growth, etc.) which will ultimately pour back into the market when investors get comfortable again. I don't think this is the end of the bull market as we know it. Certainly a setback but strong growth companies will continue to do well over the next few years and most of the solid semi-equip stocks will do well in this environment! Good luck to all!

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