Michael, thanks for the reply. First, good luck on your model. I am a professor of finance, and would be interested in talking with you some time about it, but i understand the proprietory nature of such things, and would like to discuss it with you at a later time, out of a purely academic interest, after we see how things play out. I myself am thinking of writing a book for the lay investor, but in actuality it would be more of a project trying to document building a personal investing philosophy relevant to the changing world of this time. I really think that we are sailing into uncharted waters, and there are both profitability issues but also survival issues at stake here that i have an interest in exploring. Perhaps we can explore some of these issues as well. With that in mind, let me say that i have already read your article about "Tech Stock Speculating While Wearing a Belt and Suspenders" and i loved it. In fact, with that in mind let me ask you a question, AOL.com has had a terrific run-up in price lately, largely IMHO on the back of hype generated by the movie "You've Got Mail." What are your thoughts on say buying some puts in a few weeks on the stock in anticipation of a pull-back due to perceptions of fad-buying?
I enjoyed your comments about price competitivity and the web. I did myself wonder why any firm in any industry would not develop a web presence. There truly seem to be no barriers to entry- what the hell does it cost ot build a web site? That is in fact the one real reason why i would never own any company with .com in its name. However, my thoughts are considerably different from yours with respect to semiconductor equipment stocks. Let me take up the points in order.
(1) For this industry, perhaps more so than for any other, what happens in Asia is of critical importance. I think that Asia has a long way to go as far as a recovery is concerned (for which reason i'm staying out of the oil sector for the time being), but i also think all of the bad news about the situation there is out, and will not impact the semi-sector further. I also think that the recovery in Asian semiconductor companies will precede the recovery in the rest of those economies because of the extremely critical importance this industry has over there (I lived in Hong Kong for the past 5 years and only came back to the States in July and so was there during the disintegration last year.)
(2) I also think that developments in the industry, particularly the adoption of the Windows NT operating system and the demand for highspeed data transmission and processing bode extremely well for the future of the semiconductor industry. It seems that the only impediment to the further progression of Moore's Law is the development of the software necessary to make efficient use of the capabilities of future, more powerful microprocessors. I think that hurdle will soon be overcome, and then the flood of demand for the next generation(s) of microprocessors will be right back on track. Your thoughts about what's currently out there and why it isn't exciting are relevant here. Hold on for but a little while, and the the tech developments that are really exciting will come. In addition, there are cost-effectiveness issues in play that provide impetus for the push to smaller dimensions and more horsepower which translate into more orders for semi equipment companies. Thus i see the current state of the book-to-bill ratio as at its bottom while you see the recent upturn as only a glitch in a longer downward trend. I think the two issues outlined above work powerfully together, along with an uptick in Asian demand to make for a return to positive growth on a nice time-horizon.
How the market prices industry development is another matter, and i do not profess to see completely how that is done, although with respect to the semiconductor equipment stocks, i'm beginning to get a feeling for it. At best i think that figuring out the market's translation of information into share prices is part science and part hunch-guess work. Market sentiment is not what i base my decision process on with respect to what companies to hold (i am really an old-fashioned value investor at heart) but market sentiment considerations do enter into (a) when to build positions and (b) how much leverage, if any to use or (c) whether or not i cover positions with calls.
Michael, have a happy new year, and good luck in the coming investment season. I would enjoy trading thoughts with you from time to time.
jess. |
