Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Jacob Snyder who wrote (35213)	5/12/2000 2:45:00 AM
From: Cary Salsberg	Read Replies (2) \| Respond to of 70976

Jacob, In a recent post on the Blood thread, I proposed a plus/minus 25% strategy. It was the weekend after the worst week this year. I entered buy orders 25% below those market prices an sell orders 25% above. Most of the sell orders were executed during the subsequent rally, and my cash postion moved from 40%+ to 60%+. The percentage has increased with the recent move down and I cancelled all the buy orders. The company I am employed at, TMT, has just been acquired by CMOS. I have newly vested CMOS options, and more will become vested each month. This new market exposure in semi-equips has caused me to pull back on more semi-equip purchases. To answer your AMAT entry price question, I suggest that you estimate peak earnings for the cycle and multiply by a 20 PE (the numbers for the 95/96 peak). I believe I saw $3.68 estimated for 2001. With capacity constraints becoming an issue for AMAT at $12B in revenues, and a large number of fabs coming online in 2000/2001, $5-6 per share is not unreasonable. This doesn't provide much upside, from current prices, but it would mean the low of $22 in '96 would have appreciated to $480 (before 2 splits). If you believe in a long cycle (Ian) and a higher peak PE than 20 (Brian), quantify it, and, probably, $60-80 could seem attractive. I think "Buy low, sell high, but you can't buy at the bottom and sell at the top" will be more and more relevant as we move into 2001/2002.

To: Jacob Snyder who wrote (35213)	5/14/2000 2:55:00 PM
From: John F. Dowd	Read Replies (1) \| Respond to of 70976

JS:the techs, with their high valuations, are more sensitive to interest rate hikes than other sectors. In addition to the direct effect on stock valuations, higher interest rates will eventually slow the economy. Since chips are now in most consumer products (toys, cars, kitchen appliances, and all the other "old economy" products, not just in PCs) a slowdown in the economy means lower demand for chips, which means lower demand for chip equipment. That is, demand for chips (and then chip equipment) is (going forward) going to be more closely tied to the general economic cycle. This rule of thumb is not borne out by my portfolio of tech stocks and for tech stocks in general over the past cycle of rising interest rate hikes. True there has been a correction from peaks but this is not a secular tech trend measured over yrs. Consider the following. One: The clean balance sheets of the tech stocks reflect nil to slight internal impact on these well healed cash rich companies. Two: Although discounted cash flow models might be effected to some degree, accounting relative to other industries has to be made for factor one above. (note: 5% compounds 121% in 4 yrs, 7% to 131% in 4 yrs 9% to 141% in 4 yrs. Of course the likelihood of inflation/fed rates compounding for that long is questionable but we can see that the fixed rate alternative is not that attractive and is subject to risk itself as interest rates rise. Three: As inflation increases the need by other industry segments and business in general to become more efficient is heightened by rising cost and margin pressures which forces greater expenditure on automation and computers in order to reclaim lost margins. The future of our economy lies in automation as our population base growth shrinks. We therefore are forced to spend more and more of GNP on technology to cope. The future of the US is inextricably tied to tech. JFD