Barrons had a brief mention, which might partially account for the recent rise:
Q: Any other industry picks?
A: We're interested in what we call commodity semiconductors because of basic supply and demand issues: There are no new fabricating plants being built in the world, because the entire memory sector is losing about $10 billion on an annualized rate. Or was until very recently.
Q: But isn't that because they built too much, too fast?
A: Yeah, it's just been brutal, absolutely brutal, and the Koreans, the major transgressors, really had their legs cut out from under them in the financial crisis. So everyone has been cutting back capital spending dramatically. However, we see signs of price and margin improvement in the memory area, as unit growth surges. And the two stocks that we own in the small-cap fund that should benefit are both SRAM [static random access memory] companies, Integrated Device Technology and Cypress Semiconductors. Both stocks sell for about seven times their normalized earnings power, which we see coming probably in the year 2000. So, they are very cheap. |
