My buy price: 30
1. using trailing 12Month sales, a stock price of 30 equates with a P/S of 3, which meets my Value threshhold. At 3, the P/S would be a lot higher than at the last 3 bottoms (0.9-2.2), but I don't think we'll see the 1996 valuation levels again. The company is bigger, more dominant in its industry, and investors are (still) paying a higher premium for growth now than in 1996, and I think they will continue to.
2. a stock price of 26-30 (adjusting for splits) is about where the 1997 peak was, and the range where the stock stalled for a while in early 1999. Charts often have these areas of "congestion", and this area may provide support.
3. On a log chart of the last 10 years, a line drawn through the bottoms of 1990, 1991, 1997, and 1998, goes through 30 currently. This could be considered the very longterm support line.
In addition, in order to buy, I have to:
1. NOT hear a steady drumbeat of bad news from semi companies. If semi companies, boxmakers, cell-phone makers, (across a variety of chip-making/using industries), continue to issue profit warnings, talk about excess inventory, and lower predictions on future demand, then I will continue to be on the sidelines, well into 2001, no matter what the stock price.
2. NOT have any more semi-equip companies join TER and KLIC.
3. NOT hear the faintest hint that equipment budgets are going to be cut for 2001. The 300mm transition could be put on hold, again. So far, all there are is orders (which could be cancelled), demonstration plants, plans, predictions. If demand softens, the semi industry could (again) say, "We don't need 300mm quite yet, we'll just tweak the equipment we've got, do another shrink, and think about 300mm.......later."
Things to ignore:
1. any predictions about the future, in the time period of 6 months to 3 years out. Up to 6 months out, the industry can make good predictions. Things have already been locked in, committed to. Over a greater-than-3-years timeframe, it is safe to say that the semi and semi-equip industry will grow faster than just about any other industry. But, between 6M and 3Y, is a "blind time". Over and over, predictions about this timeframe, even from the wisest, turn out to be very very wrong. IMO, these predictions say more about current sentiment, than about what the future actually will be. Knowing what I (and everyone else) don't know, is why I focus on the past and present.
2. P/Es, especially using a forward E. First, because the forward E guesses change so radically. Second, it's a lagging indicator.
3. % drop from the early-2000 high. It is not comforting, that the current drop now equals (in magnitude) earlier drops. From a P/S of 12, we had a lot further to fall.
3. Book-to-bill and bookings. I will, however, be listening carefully for any hint of order cancellations. |
