Sheer numbers illustrate that SVGI is a dog (in line with dogs like VLSI, though in a different business). Look at the trading volume 41000 shares today, about a seventh of average. Look at the stock price of about $ 12 - it is below both the 50 day and 200 day moving averages.
I am also looking at a table of Semi-equipment manufacturers put out by January 1999,AAII Journal,(page 4) written by Michael Murphy (lot of data taken from the California Technology Stock letter and Bloomberg reports - fairly reliable!). This is a comparison of SVGI with 30 other peers! SVGI is at the bottom tier (5th from the bottom) in pretax profit margin of 8.5 %. Novellus is at the top with a pretax profit of 31.3%. Watkins and Johnson is also at the bottom with a pretax profit of 9.3 %. So dogs eats another dog (SVGI buying into WJ!). If you put SVGI with ASMLF, CYMI, UTEK - SVGI(getting very myopic amongst the semis - i.e lithography) business has the lowest profit margin. In order to survive in any business in the long run you should be in the top 20 % of what you do, otherwise you won't be around in the long run on your own. SVGI and WJ are merging and there is going to be write offs for the next two quarters. So goes the stock price !(Wall Street didn't think a diddly sq... about this merger and saw it as a sign of survival - thus stock price is still languishing!). So we can kiss off any dramatic upturn for most of 1999 and thus this dog SVGI won't bark for a while!
But every dog has its day! Look at VLSI. Went public at $ 13 in 1983 and it was at $ 10 recently (this February 1999 - after 15 years!). Probably one of the worst returns for any stock. SVGI did better than VLSI from the returns perspective. But Philips kicked the dog VLSI and it went up to $ 19!. SVGI can shine only in that light. They are not going to increase their market share or leadership, even if lithography business takes off in 2000! It will be slow. The best SVGI could do is $ 20 - 25 (book value is $ 17) in a buy out. In 2000 when the market takes off, it will trade over its book value. That is my reasoning. Despite all this stricture, I hope you see the truth behind this dull company. Applied materials has over 4 billion in revenues and they can buy this company to grow (after cutting the fat out!) - or a foreign conglomerate with a lot of cash can buy SVGI.
As a coup-de-grace, Valueline 1-15-99 (expanded edition issue)gives SVGI a 5,4 rating - bottom most in timeliness and next to bottom for safety. As an euphemism they call it "bargain basement stock" - I used a more practical Wall Street term - "dog"! |
