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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Rob S. who wrote (74269)	4/5/2001 5:33:26 PM
From: LTK007	Read Replies (2) \| Respond to of 99985

<have P/Es well under 20.> make sure you adjust that to forward earning projections,as semis are priced more on forward than trailing earnings in my opinion.max

To: Rob S. who wrote (74269)	4/5/2001 10:06:47 PM
From: brunn	Read Replies (1) \| Respond to of 99985

Chip stocks historically have been cheaper than other technology sectors that were felt to be less cyclical--e.g. networkers/fiberoptic companies. As networkers showed faster and faster growth going into the bubble, their P/E's were expanded beyond belief while the chip industry's P/E's were left behind: quicken.com Now, that the market has recognized that CISCO's business can go into a downturn as well, the bubble around its P/E has burst. I believe this is the reason people perceive that the SOX is relatively overvalued--people see how CSCO has fallen over 50% year to date vs. AMAT being roughly flat, forgetting how dramatically CSCO's valuation was stretched over the last few years. Interestingly, I do believe chip stocks are mildly overvalued in one sense--comparison with previous cycle lows. Semis typically will bottom at lower levels of Price/Sales and Price/Book than we see now. A possible explanation may be rotation--the tech funds that are forced to buy tech prefer buying a sector that is familiar with a downturn than with dealing with the uncertainty of how the CISCO's will do in a downturn. Finally, comparing forward P/?E's of the different sectors is becoming meaningless as they probably are all approaching 0 at this time.