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

To: Cary Salsberg who wrote (35218)	5/12/2000 2:06:00 PM
From: Jacob Snyder	Read Replies (1) \| Respond to of 70976

thanks, Cary: 1. I like that +/-25% strategy. In 2000, I've been buying quality stocks when they are sitting at multi-year low PEs. Then, I lighten up on the rallies, which gives me cash to take advantage of the next dip, while I gradually acquire a long-term position (at a gradually lower cost basis). 2. In January, I posted an analysis on this thread, trying to find a "fair value" price for AMAT. I took the consensus EPS estimate for year 2000, added 10 cents per quarter (because I thought the consensus was too low), and came up with 1.87. 4 months later, the consensus is 2.24. Forward EPS estimates change radically and constantly. I understand your reasoning re peak cycle EPS (in 2001??) X expected PE, but basing buy-in prices on numbers that no one seems to be able to predict, is a lot like throwing dice. Intel doubles their equipment budget, and everything changes. So maybe the Fed overshoots on interest rates, we get a hard landing, and a recession causes chip demand to fall, and Intel cuts their equipment budget in half. And AMAT EPS is flat (2000 to 2001). I'm not saying this is going to happen, I'm just saying it has a not-small chance of happening. 3. One of my favorite Buffetisms (funny how he was most out of favor in the press, just as valuations and euphoria were cresting) is when he says: "future increases in earnings should be inevitable. That, plus the ancient out-of-fashion "margin of safety" principle, may lead me to sit out the rest of this upcycle, and wait till the next downcycle (2002 or 2003). That would be the safest thing to do. I don't like to throw the dice unless they are weighted heavily in my favor. 4. But I may play the buy-the-dips-sell-the-rallies game, with a modest amount of money. AMAT, and the other quality chips/chip equips, out of all the techs, seem to fall the least and rebound the most, in this extremely volatile 2000 market. I'm expecting at least a further 20% down on the Nasdaq, sometime this year (from today's levels), with several false rallies on the way down. Caveat: I've been expecting this since early 1999. 4. If I buy 2003 LEAPs, then, even if we have a recession in 2001 (again, just a possibility (not probability) which must be considered), I'll be OK. Right now, I think I'll just watch, but I'll probably be buying 2003 LEAPs, in increments, sometime in 2000. 5. re: "Buy low, sell high, ...will be more and more relevant": Yes. Also: "Valuation always matters", and "know what you don't know".