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

To: John Trader who wrote (40697)	12/11/2000 1:39:49 PM
From: Gottfried	Respond to of 70976

John, thanks for sharing your thinking. A 30 week moving average has done pretty well lately giving buy and sell signals. Gottfried

To: John Trader who wrote (40697)	12/11/2000 5:03:51 PM
From: Jacob Snyder	Read Replies (1) \| Respond to of 70976

good post, John. Some comments: 1. Yes, a stock price decline does usually happen before the bookings peak. However, even on cyclic upturns, the stock can repeatedly drop 30%, in just normal month-to-month volatility. So, the stock has to be off about 40%, before it predicts a coming downturn in bookings. Less than a 40% dip, and it may be a false signal. And, if you've already ridden it down 40%, it probably makes sense to just hold on, for tax reasons, and because you may find yourself selling at the bottom. 2. notice, the troughs in bookings coincides (rather than lagging, as the peaks do) with the stock price. 3. AMAT is an excellent proxy for the semiconductor index. I think it is also more visible this cycle, (and certainly has a bigger market cap), so it may (going forward) more closely follow the Nasdaq. It's possible that AMAT and QCOM may replace INTC and MSFT as tech bellwethers. Not yet, but in 3-5 years. 4. I think asking "when will AMAT be back at 115" is the wrong question, using the wrong yardstick. The 2000 top was an outlying data point, and should be thrown out. The 1995-2000 tech stock mania is a twice-a-century event (the last one was in 1924-1929), so you may have to wait till around 2050 before you see those valuations again. It would be better to ignore the late99-early2000 mania top, when looking for patterns to help predict the future. So, I agree with Cary, who thinks we may have seen the top in stock prices for this cycle, even if the business (measured in bookings) doesn't top till 2002. 5. I put 20% of my money in AMAT on 11/30 at 40. I am seriously thinking about selling all at 54 (for a quick cap gain about the size of my mortgage). The chart looks like there is a trading range of 40-54. My experience with AMAT is that bottoms are U-shaped, not V-shaped. That is, there is a bottoming period of several months, and the lows get retested at least once. Sentiment takes a while to turn around, and there are always several false rallies first. The news continues with the steady drumbeat of warnings from a variety of tech companies. 6. I certainly would not chase this stock at prices over 50. In addition to the resistance at 54, there is the consistent pattern of momentum investors buying AMAT at prices that later cause margin calls. Lots of people bought this stock in the 90s, because the chart looked so wonderful (and the news was all wonderful then, too). Safety is achieved by buying the right stock at the right price, not by diversification. How many people bought a basket of internet stocks in the last 2 years (all at triple-digit PEs or no E), and are now down 80%? 7. And, if you are going to diversify, you'd have to buy stocks like mobile-home builders and steel companies, because they are in industries that don't sell or buy from AMAT. There is a lot of "false diversification", where investors buy 20 stocks, but all 20 tend to go up or down together. So, for instance, I hold only one semi-equip, and only one chip company.