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Politics : Formerly About Applied Materials

AMAT 225.18

-1.5%

Nov 18 3:59 PM EST

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To: Gottfried who wrote (28723)	3/2/1999 4:32:00 PM
From: EACarl	Read Replies (3) of 70976

To all: AMAT VS. SECTOR. I invest in many semi-equips. The current situation of AMAT extreme over valuation compared to the rest of the sector is very disturbing. The lows of 1996 saw AMAT at $11. The business conditions of 1998 were far worse than 1996 and therefore should have seen AMAT go even lower than the 1996 lows. Also many of other semi-equips did go lower than their 1996 lows during 1998. AMAT (when it hit $70 recently) was already at a price higher than the previous cycle peak by over 30%, while many other companies in the sector are still at or near their 1996 lows. AMAT is trading at over 6 times sales, which normally 4 times sales is considered expensive. Even if sales increase by 50% (which they probably will over the next year or so) that still only puts us back to a still expensive 4 times sales. Many other semi-equip companies who are considered to be a leader in their respective niche are trading around 50% less than their previous cycle highs. EVEN IF AMAT gets back to the $2.00 in earnings, the stock is still at P/E of 28. The disparity between AMAT and the rest of the sector (especially smaller companies) has never been more extreme. A double or triple in price for AMAT could be justified over the past few months (as many other companies have), but it should have been from a much lower starting point. It would seem justified to me that AMAT could lose half its value while the smaller companies could increase in price by 50%. Obviously that WILL NOT happen, because AMAT (being the biggest) is a barometer for the sector, and if AMAT goes down, most likely everybody goes down. That is what brings me to my dilemma. I think many semi-equips are still good values to be in for the next year, but it scares me that the company everybody watches to lead the sector is already more than fully valued. Comments welcome.

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