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Technology Stocks : Semi Equipment Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Return to Sender who wrote (552)	5/11/2001 5:45:31 PM
From: Cary Salsberg	Read Replies (2) \| Respond to of 95757

RE: " I would appreciate your insight into this group of stocks since this is the first time I will be participating in a cyclical rally." The semi-equips have been cyclical growth companies. The secular growth is due to the penetration of chips into many areas of the economy and, more importantly, the growth of technology. The cycles have been due to the huge quantum cost of a chip fab and the long lead time to build, fill, and ramp production. These, cost and lead time, have caused periods of over and under capacity, and cyclical orders. Today, we do not have a typical semi-equip down cycle. The decrease in equipment orders has not been the result of overcapacity created by new fabs coming online. In fact, the equipment which generated the huge revenues of 2000 are probably still waiting to be fully ramped up. The down cycle is caused by the huge falloff in the business of semi manufacturers customers. The PC, wireless and wireline infrastructure, and wireless handsets are all in a slowdown simultaneously. Some of the reasons are the huge infrastructure buildup associated with the dot-com bubble and the lack of killer aps to drive PC and wireless handset upgrades. In previous, typical cycles, the bottom formed a V and buying at the bottom proved very rewarding. Recent comments from NVLS CEO Hill indicated that this bottom would be a U. The longer these companies must operate at low order levels, the greater chance for both operating and restructuring losses. Losses raise the spectre of business failure. In a U bottom, stock purchases need to wait until there is a sign of recovering orders. I have published my buy prices for AMAT, KLAC, and NVLS on the AMAT thread. For example, I will be buying equal dollar amounts of AMAT from $40 down to $25, in $2.50 increments. I will not wait for order improvement if my prices are reached, but I will not buy at current prices unless I see order improvement.I

To: Return to Sender who wrote (552)	5/11/2001 7:21:56 PM
From: scott_jiminez	Read Replies (2) \| Respond to of 95757

Your welcome. I would advise to keep a very open mind in your approach to this sector. Dogmatic responses to current conditions and/or common wisdom can often result in below average returns. Your belief in upcoming selling, or the now oft-repeated conjecture that 'this time is different' are just the sort of short term prognostications that can result in poor investment choices in this sector. We may have selling (or buying) in the near future and this may not be a typical semi-equipment down cycle. However, my experience is that these are risky, if not foolish, investment principles to apply at any time for these stocks. You should not listen to me or anyone else who claims they know either the reason for the current state of the industry or 'typicality' of the cycle (there were numerous folks who claimed, last winter/spring, 'Today, we do not have a typical semi-equip up cycle.' and then proceeded to explain in compelling detail why the strong order growth would continue through 2003). And keep in mind for every CEO or analyst referencing a vowel to characterize this cycle, there is one to cite a pointy-bottomed consonant. For example, ChipPAK is a major client of Kulicke and Soffa. A couple weeks ago the Thomas Weisel brokerage upgraded the stock to buy and noted 'improving order stability, believes the worst is likely over; says current quarter represents the fundamental bottom for ChipPAC and sees sequential growth for the rest of 01; although ChipPAC saw the downturn earlier than the majority of its peers, believes the Company is likely to be the first to emerge.' Klic also 'saw the downturn earlier than the majority of its peers', thus is may also 'likely to be (one of) the first to emerge.' In my earlier post, I noted that AMAT, NVLS and TER (add NVLS) were 'no brainers' in this sector. I would advise to keep a very open mind about this assumption as well. Most folks will recommend these stocks to a novice in the field. Leadership can change very rapidly in this industry; former leaders (given high multiples) can be left in the dust during a new cycle if they can't regain their former high growth rate. In fact, while these four stocks may be 'no brainers' it is precisely because of this growth rate issue that I am avoiding them. I started a portfolio of equip, stocks on 9/28/00. Here is the performance through the close today: LRCX +36.1% KLAC +12.2% KLIC +8.9% TER +1.3% NVLS -1.1% AMKR -14.2% AMAT -18.4% ASML -23.8% Group +0.1% Best wishes, Scott