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

To: Jacob Snyder who wrote (38630)	10/24/2000 5:10:09 PM
From: mitch-c	Read Replies (1) \| Respond to of 70976

<MC>"good news takes things down (expectations met, no future), and bad news drives 'em up (can't get worse ...)", and "percentages are RATIOS, not raw data" <JS>Total bookings were down. That's raw data. Nat semi. warned (that's what, the 9th semi to do that, I've lost count). So, the stocks went down on 2 pieces of bad news. Entirely rational and reasonable. The irrationality was the April peak, at a P/S of 12, and the 1996 low, at a P/S of 0.9. Both good points. As you've probably gathered, I'm confident of AMAT's LT prospects. What's changing my mind in the ST is the creep of those warnings - and they're beginning to be pitched as demand-side slowdowns -"We can't sell stuff"- instead of the prior supply/capacity warnings - "We can't make stuff." <JS>At this point, AMAT (at a P/S of 5) is in the upper middle of its longterm valuation range, and is, IMO, approximately fairly valued. However, my experience with this stock is that "fairly valued" is just a very temporary stage, which the stock briefly hits while in the midst of swinging from absurdly undervalued to absurdly overvalued (or vice versa). Also agreed - AMAT behaves like what we called a statically stable but dynamically unstable system in aero engineering. Roughly speaking, take a bowl and a marble. With the bowl face-up, the marble will roll to the bottom. If you knock it around, it'll roll to a stop where it was. That's statically and dynamically stable. However, if you turn the bowl bottom-up, the marble has a different problem. It is possible to balance it at a center point - meeting the requirement of static stability. However, if you knock it around, it'll roll AWAY from the center, not back to it. That's dynamic - or moving - instability, where it seeks extremes. It diverges. So, I agree. AMAT is headed either up or down; it's not likely to stay at the current price. It'll probably keep going until it receives a strong enough kick in the opposite direction. (I think the professional investment word for this behavior is "volatility.") However, there are enough investment vehicles available to profit from any movement ... as long as you're confident it will move, which I am. My current approach is to hold a LT block of shares, but use about 10% of that value in out-of-money options. I'm currently working the JAN 01 series, which I think will be subject to motion based on: 1) Election results 2) AMAT's NOV report 3) Tax-related activity 4) Calendar seasonality 5) Short time horizons / low time premium 6) Chip company results and orders 7) AMAT production efficiencies 8) R and D payoffs ... It'll be a choppy ride compared to your strategy, but I expect opportunities to avoid substituting activity for profit. <g> - Mitch