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Technology Stocks : Semi-Equips - Buy when BLOOD is running in the streets! -- Ignore unavailable to you. Want to Upgrade?

To: Zeev Hed who wrote (8564)	9/14/2000 11:10:00 AM
From: Ian@SI	Read Replies (1) \| Respond to of 10921

Zeev, Thanks for the detailed response. ... especially as I don't agree with most of the assumptions made. :-) the fundamentals might be strong, but they are no longer "strengthening". As the sector recovered from the most severe downturn in its history, the growth was breathtaking. Last year's rate can't be expected. But we will continue to see the sector grow much faster than the overall economy. e.g. 40% plus vs 5% to 6% at best for the GDP. YOY comparisons are not going to see the same percentage growth as we have seen recently Completely agree. To which I add, "So what?". The growth will still be much higher than most other sectors of the economy; the street will reward that growth once they're convinced it's for real. I believe that the current cap ex in the industry cannot be maintained Completely agree. CapEx as a % of chip sales is at an abysmally low percentage. This rate of investment will lead to prolonged capacity shortfalls in which chip availability will continue to be the bottleneck preventing a higher rate of economic growth. Capex must double from current levels within the next 2-3 years just in order to hold capacity utilization at its 95%+ level. I also believe that next year we will have a bear market in general Disagree. I see nothing that will bring on a bear. that the peak in equip shipments will probably seen sometime next year, not 2003. There's a bold prediction. The only way I could see that happening is if the Communications Networking revolution was stopped dead in its tracks; the proliferation of chips into every aspect of global life is repealed; and some massive global economic calamity brings upon a depression. Honestly, I just can't see a scenario that would call for no growth for 2001, 2002 and 2003. You'd have to predict that the chipmakers aren't going to improve their technology, productivity or capacity. And that just hasn't happened in the sector's history. Look at AMAT, the peak here in April already discounted quadrupling of the shipment rate at the trough. So? If I remember the trough shipment numbers, they already have quadrupled, or very nearly so. And I expect that for capacity reasons alone, they need to double again from today's levels. Either the world stops its progress, or the sector thrives. Best regards, Ian. P.S. (I might be willing to concede that the real truth might lie somewhere between our 2 views. But it would be a lot closer to mine. <vbg>)

To: Zeev Hed who wrote (8564)	9/14/2000 11:13:04 AM
From: Proud_Infidel	Read Replies (1) \| Respond to of 10921

fundamentals might be strong, but they are no longer "strengthening What exactly do you mean by this? '01 spending should dwarf '00 and '02 should be larger than '01. It most certainly is strengthening, although not at the rates we have witnessed several months ago. I believe that the current cap ex in the industry cannot be maintained TSMC is currently running at 100% and is sold out for all of '01 and part of '02. Yet these are the same cos. which have been spending above the industry trendline. Even with the spending we have seen, they still cannot meet demand. This is due to several years of rampant UNDERspending in the latter half of the 90's. Look at AMAT, the peak here in April already discounted quadrupling of the shipment rate at the trough. AMAT is now trading at about 4.5X their revenue run rate, not expensive by any means. And in terms of discounting, if we see 300B is semi sales anytime soon, this could translate into 30B in sales for AMAT, assuming they reach 40% mkt share(their goal is 50% BTW). So we are surrently trading at less than 2X sales, no means a discounting of the cyclic peak IMHO. I believe you are incorrect on most, if not all of your counts, using questionable logic and assumptions. Your thinking is no different from that of WS at the moment, and I believe they will be proven wrong in a BIG WAY not too long from now. Too many people use cookie cutter logic and assume the cycle has to last 2 to 3 years. BK

To: Zeev Hed who wrote (8564)	9/14/2000 12:03:44 PM
From: scott_jiminez	Read Replies (1) \| Respond to of 10921

Gee let me try my hand at this guru stuff... I think that the fundamentals are indeed strong, in fact, stronger than they would appear by the current valuations in the largest cap stocks (AMAT, TER, KLAC). This is due to seasonal factors and nervousness created by misinterpreted signals (i.e. the pushouts by Klic and Ter). The sector is in a holding pattern for the moment - after a severe summer correction - and this plateau will end soon as supply shortages become resolved. With this resolution, visibility will increase significantly over the next couple of months and the beginning of the second leg of the up cycle will commence. This up leg will be stronger than first one not simply because of the huge (and growing) demand for telecommunication equipment and the surprising surge in PC sales, but due to the faster than expected recovery in the Japanese economy and the ongoing substantial demand from China (i.e. even if the US economy slows somewhat, formerly quiet markets on the international stage will pick up much of the slack). Thus not only will YOY revenues and profits strengthen significantly in this up leg, but, as countless industry insiders have been reporting recently, this stage of the cycle is very likely to last well into 2002 if not 2003. One of the central reasons for the sustainability of the up cycle is a direct function of the order delays we’re witnessing now: very substantial capital expenditures have been delayed due to supply chain problems. Again, the resolution of the supply bottleneck will reveal the level and growth of demand. The visibility resolution during the next couple of months will drive the vast majority of equipment stocks to new highs. The large caps stocks will certainly participate. Some of the most battered-down stocks, those of the backend (Klic [surprise!], Egls, Cohu), which suffered the most from visibility issues, may see the best YOY gains from current levels as the fog lifts. Increased visibility will also reduce concerns about near term down turns since the 2-3 year window will be better appreciated. Thus the degree of valuation-discounting be muted. I gather my information from the semiconductor industry websites, from press releases of individual companies, and from chat room participants I find worthy. Those participants whose process of information synthesis is not framed and constrained by dogmatic attention to prior cycles garner my full attention. {and BTW Zeev, have you checked out the DJ utilities average recently? It's been hitting new highs....a very strong suggestive indicator that interest rates are coming down. A decreasing-interest rate environment suggests that the economy has probably had a soft landing already and no recession looms. A decreasing rate environment is also very bullish for stocks)