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

To: Alastair McIntosh who wrote (38659)	10/24/2000 7:47:37 PM
From: Jacob Snyder	Respond to of 70976

Wow. Someone more bearish than me, and even less willing to believe ItsDifferentNow. Actually, it's true that AMAT used to have a lower valuation range. But the shift upward in peak and trough P/S ranges started in 1997, when the peak P/S was 4.4, and continued in 1998 (peak P/S 5), 1999 (peak P/S 8.5), and reached asymptotic insanity (that phrase is patented, use only with permission) early this year, at a P/S of 12. The trough P/S shows the same pattern (1998 trough 2.2, much higher than the 1995 or 1996 troughs (both 0.9). I think this steady rise in valuations is justified, because the company is more dominant in its industry, and semi-equips will be getting a larger % of semi sales $s going forward. I do not think the rise in valuations is justified because the industry is getting less cyclical (it isn't). All IMO. I could easily be wrong, which is why I will only start buying at a P/S of 3. I will not be loaded up to my eyeballs in out-of-the-money LEAPs until (if, I mean) AMAT hits a P/S of 1, or I am certain (really certain) the upturn has started. By then, of course, the stocks will most likely have already doubled or tripled off their bottoms, and be out of my buy range. It is entirely reasonable to say the longterm P/S range of AMAT is 1-4, not 2-6. That means you think the entire tech move after the October 1998 crash is just a mania, an "outlying data point", which should be thrown out of the statistics, because it is at so great a variance from the other data points. Could be. But I think the increase in valuations in the techs over the last 2 years is partly (only partly) justified.

To: Alastair McIntosh who wrote (38659)	10/24/2000 8:40:41 PM
From: Proud_Infidel	Read Replies (1) \| Respond to of 70976

Alaistair, At different points in the cycle, different methods are typically used in valuing SCE stocks. During downcycles, when little/no earnings are made, using PSR or Price/Book is necessary. Because these companies have earnings now, and should continue to do so, EPS is primarily used. It should be noted also however, that prior to 1999, AMAT's highest net margin was 15%. We are now more profitable than ever with NM's of 21%. Rarely will the market not realign valuations when there are improvements in the business such as we have seen in AMAT over the past 5 years. When you add to this the fact that AMAT is now in more markets, with increasing market share, I find it difficult to believe AMAT will return to its old valuation range. IMO, Brian