Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Sam Citron who wrote (49031)	7/10/2001 9:17:26 PM
From: Cary Salsberg	Respond to of 70976

RE: "You seem to base your investment strategy on the rather simple premise that the semiconductor sector will be as dynamic and lucrative for investors in the future as it has in the past....how can you be so certain?" I am not buying the whole sector. I am not buying the market favorites. I believe that certain semiconductor technology will be "as dynamic and lucrative for investors in the future as it has in the past." The future, here, is the next 5 years. There are significant advances in quality of life to be made using semiconductor technology. The capital equipment, programmable logic, and mixed signal sectors will all be strong participants because they provide fundamental technology that is applied across the entire spectrum of applications. RE: "...what is to prevent price cutting by existing firms from eroding profits?" Where the product is a commodity and there are many competitors, price cutting will exist. The companies I like have few competitors and almost no truly commodity products. These are "real" technology companies. No artificial monopolies, no current fad applications. RE: "... Is there a limit to the si content of the average consumption basket?" Of course, but for the future I am concerned with, there is plenty of room for growth. Remember, revenue is price X volume. Price has been falling and will continue and there is great price elasticity when goods fall to the "right" price. Semi based products always seem to fall to the "right" price. RE: "Is there some theoretical point at which the marginal propensity to consume silicon trinkets may actually decline?" This would depend on the inability of price reductions and added functions to drive consumption. There is probably a point, but we are not at all near it. RE: "but the natural reversion to the mean, expected hangover and all?" I am least confident about price behavior. I am always prepared for paper losses when I execute my buy plan. It is inherent in my process. I hope to minimize paper losses, I hope for the shortest duration before the move up, and I hope for the greatest move up, but I am confident of an eventual return to historical (before bubble) growth rates and historical market valuations. For AMAT, 6 times sales on $12B revenues, gives $90. (In a previous post, I mistakenly said $75.) 4 times gives $60. A $10 to 30 buy price gives 2 to 6 times appreciation. RE: "how can you be sure that your favorites will not suffer the same fate as many of their leading customers?" There is no certainty. I picked 8 in 3 industries, not 1. The leading customers are closer to the end markets and don't "own" the key technology. Leading customers will come and go, while my favorites continue to develop and own the key technology. They have never been darlings because the market doesn't really understand what they do. If you watch recent commercials, you know AMAT has something to do with Porsches.