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Technology Stocks : Kulicke and Soffa -- Ignore unavailable to you. Want to Upgrade?

To: Red Dragon who wrote (3822)	5/27/2000 1:16:00 PM
From: Donald Wennerstrom	Read Replies (1) \| Respond to of 5482

I certainly agree that one shouldn't be one-dimensional when trying to make money in the stock market. To buy KLIC only because it has a next year's PE ratio of 8 is not the only factor that goes into the overall equation of whether to buy the stock or not. Having said that, however, it is certainly true (if you believe the philosophy put forth by Zack and his organization - that earnings are the greatest predictor of stock valuation over the long term) that it should be a top candidate for buying and holding in the semi-equip group. Also, the semi-equip group is a cyclical group. No argument from me on that point. However, I also believe there are several factors at work which will make it less cyclical in the future. Saying it another way, as time marches on, situations change and things that were true in the past may change their characteristics in the future. The continued expansion for the uses of semiconductors in all types of future applications should reduce the cyclical nature of the group. I think the recent demise of the semi-equip group has more to do with the "death spiral" of the NASDAQ in general during the last few weeks than it does with the specific cycle of the semi- equip group. All tech stocks were arguably overvalued in March and they have been paying the price recently, including the semi-equips. Depending on the sector, many stocks are probably undervalued now, but we have a "small problem" preventing stock price increases back to a "fair value". It is called Alan Greenspan and the Fed. They have orchestrated the present situation brilliantly. During May, the market was tanking, and paralyzed - waiting for the Fed to lay on the 50 basis point increase (and also most importantly - what would the Fed say about future increases). Well, guess what? - the Fed said yes to a 50 basis point increase (and also most importantly - we may have to do it again in June!). So what happened? - The day after the May increase, everyone is paralyzed again waiting for the 28 June meeting. I think this situation has far more to do with all stock prices today than the cyclical nature of the semiconductor business. In my opinion, the Fed must be very pleased with themselves. They brought the NASDAQ down 2000 points since 3/10, a period of about 11 weeks. They have paralyzed the markets until the June meeting (and if they wish they can paralyze it further by threats of further rate increases after that). Again, I think this situation has far more influence on the semi-equip stock prices of the last 11 weeks than "the perceived ending" of the semiconductor cycle. However, all prophecies can become self-fulfilling given enough support. If the Fed persists enough in its present course, the economy will crumble and the semiconductor cycle will truly be altered by a shrinking business base. As to the subject of insiders, I think they sell when they think they can get a good price. Being pretty smart guys in general, they probably saw the "hand-writing on the wall" with what the Fed was doing to the economy and decided to sell. I don't think it is any more complicated than that. To me, insider selling means very little - insider buying is much more significant. Don W.