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

To: brunn who wrote (39974)	11/25/2000 5:24:36 PM
From: John Trader	Respond to of 70976

Brunn, Thanks for the insight. Maybe a good way to look at this is to try to estimate the range of time that might be required before the stock recovers. I know this would be hard to stomach, but even if it took three years from here to go up 2.5 times (from Fridays's close, which would bring it just over its old high), that would correspond to an average rate of return of 35% per year, which is not bad. A key question for me is whether or not the stock will take out a new high during such a time period. In the case of AMAT, I think the answer is yes, but I hope that I am not wrong. I hope I am not missing anything, but I find it hard to see how AMAT could not hit a new high during the next 3 years. If AMAT was in the PC business, for example, then I think the time period could be longer for this, but supplying the chip equipment seems like a very solid business to me at this point in history. With AMAT one does not need to try to figure out whether web access will move to wireless devices or if PC's/laptops will remain dominant. Of course, one would have to be able to handle the emotional side of a prolonged recovery by buying in here. I think my approach is going to be to average down as it goes lower. This would be a terrible strategy if the stock does not come back, but I think I am going to gamble on that it does come back. I guess I am also gambling on the market not pricing AMAT efficiently here, because if the returns are going to be 35%/year from here (or better) for a few years then the stock is undervalued. I think in general the downturns in the tech industry tend to be a great time for making money if one buys into stocks that are solid, and also somewhat cheap using conventional valuation measures. Right now I think the chip equipment and chip stocks are about the most solid technology companies to buy. Hope I am right about this. I realize that my reasoning is rather simplistic. Hope the comparison to a company like Polaroid (former "Nifty Fifty" stock) just after the peak in the 70's is totally inappropriate. I agree with you though that it could hit 30 before going higher. Maybe I will get a prescription for some kind of special pain killer in that event.