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Technology Stocks : IDTI - an IC Play on Growth Markets -- Ignore unavailable to you. Want to Upgrade?

To: Rob S. who wrote (11065)	12/29/2000 6:57:30 PM
From: Rob S.	Read Replies (1) \| Respond to of 11555

Happy New Year! And what a year it was: It started out with those trusted investment ANALysts professing that tech stocks should be judged by "new economy" metrics such as page hits or sales growth projections for 2005. Using these new metrics for judging stock valuation solved a lot of problems for the ANALysts - there was no way they could be disproven. Valuations of semi stocks became based on fictitious sales projections predicated on about 60% industry growth in components. A simple warning signal should have drummed in investor's ears; component IC sales can't possibly exceed end user product sales by such a wide margin for very long. While electronics industry end usage was growing at 30%-40% (a very healthy rate), component sales of 60% were out of line with reality. The Internet bubble was the over-riding wrench in the works. ANALysts, such as Mary Meeker and Henry Blodgett, put forward projections for eventual growth in earnings that had absolutely no basis in rational thinking. The idea that the Internet would provide a magical vehicle for both growing sales AND eliminating the normally ruthless level of competition in the retail field was so dumb that only a rabid public could have believed it . . . and they did. But once the huge capitalizations of the Internut stocks collapsed, so too did the public's confidence in the broader market . . . ashes, ashes, all fall down. The year started out with the largest divergence between the tech stock part of the "market" and the rest of it that had ever been seen. Measured graphically, this level reached seven standard deviations of divergence. That is a level at which the statistical probability of convergence of about 99.997%. Either the S&P 500 could have more than doubled while the NASDAQ stood still or the NASDAQ could have come down. Now we know which. When looking at where we go from here, it is important to note that the convergence has now overshot (as it usually does) and the pendulum has swung to the side where many stocks are under-valued on a historical basis. Of course, that assumes that the economy isn't headed into a major recession and growth resumes by the second half. From a technical standpoint, the NASDAQ is at the most oversold point in it's history. This would normally be the greatest opportunity of a lifetime. Unfortunately, a lot of the reason the NAZ has collapsed so much is because it had reached truly irrational levels. Valuations are down but they cannot be considered cheap if the economy dives over a cliff. IDTI and other stocks are cheap if they can continue to pump out products at a level reasonably close to forecasts. As a rule, take any current forecasts and discount them by 20%-40% depending on the company. If the company still looks cheap and as the lower projections are proven overly pessimistic, then plunge in and soak up shares while the market is wallowing in doubt. I am more optimistic now than I have been in two years. I don't know when the market will turn and can only gues that it won't zoom up to previous nose bleed levels quickly. This time around stocks will move up because their companies do the banal stuff like sell products and make profits.