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

To: John Trader who wrote (41131)	12/26/2000 11:58:58 AM
From: Gottfried	Read Replies (2) \| Respond to of 70976

John, I don't value the stock any more. To me it's a given that Applied is well run and continues to gain market share. Yes, you can look at AMAT PE and PSR at cyclic price lows and compare. But it is dangerous to assume, for example, PSR at the next price bottom must equal PSR at the last cycle's price bottom. Price is too unpredictable. If you are looking for a rule, you have company. :) For those wanting to buy near price bottom: buy a little higher after you can see it's a bottom. In past cycles price has gone almost sideways near the bottom for many weeks. The charts are useful for seeing that. Gottfried

To: John Trader who wrote (41131)	12/26/2000 8:52:53 PM
From: brunn	Read Replies (1) \| Respond to of 70976

fundamental valuation of AMAT here relative to its valuation at the lows during past downturns Current valuation vs. 1998 bottom: ratio now 10/98 P/B 4.3 2.5 P/S 3.2 2.0 Book value, however, is likely to rise a little in the next quarter or two as further profits are bound to come in. This will cause the P/B ratio to fall about 10-20% (to about 3.8) even if the stock price does not. Sales may drop, but on an annual basis probably will be roughly flat. Sales grew rapidly over the last four quarters and even with the upcoming downturn it will be hard for them to fall further than they rose. For AMAT to reach the P/B and P/S of 1998 it would need to fall below 25. The problem with this analysis is that AMAT has typically been awarded higher valuations over time in terms of book value and sales as they achieve greater market share and improved margins. The P/B and P/S of 1996 bottom were about 2 and 1 respectively and if you waited in 1998 for the stock to reach those levels again you would have never bought the stock. Also, hopefully conditions in 2000 will not reach the depths of 1998. On the other hand, the current technology valuation correction occurring in NASDAQ could hurt comparisons with 1998 if the NASDAQ corrects to pre-1998 valuations. Relative to earnings I believe the NASDAQ has roughly reached 1998 levels relative to earnings, which makes sense given similar interest rates and slowing economy concerns.