Dick,
I work in the energy industry and have seen the same service company consolidation trend work wonders on service and drilling companies' earnings now that we have entered a demand- driven push worldwide in crude oil prices.
I see a parallel in the chip making industry. With dropping chip prices demand for chips is stimulated. For the short term, I would bet that chip makers can "tweak" their current production equipment and extend output. We did that with our oil fields in the oil industry too. But at a certain point to meet demand for products, we had to begin hiring the service companies in order to drill more oil wells- just like the chip makers at some point will have to do....
Like a surfer, I'm sure that we have found a nice spot on the coast to surf (i.e., capital equipment stocks). The only question is which beach along this part of the coast will have the best waves, and when will they start pumping?
My guess is that we may be a little early in this sector for the uplift. Yet with additional chipmaker upgrades of Micron Technology and LSI Logic today, there are further indications that chip demand may be strengthening which is a good first step. Given the high betas and small floats of these stocks, if you're out one week, then you may miss a large part of a move.
The downside of course is the large pounding we took last week. But if it's any consolation, about 18+ other tech stocks were hit 10% plus the same day as Semitool. (You can check this on the "Big Movers" Board here in SI).....
So I'll camp long in SMTL, and limit any day trades to larger volume techs like CY, AMAT, or USRX....
Sincerely,
Doug F.
P.S. I consider consolidation of equipment suppliers a "given". I seriously doubt that AMAT, NVLS, etc., will allow small cap "upstarts" to upstage them.... But just like the oil industry I bet that buying of the small caps will not commence until the "big boys and girls" are flush with cash- i.e., the upturn in the sector has already begun.... For a contrary opinon, check out what General Instruments did today.... |
