Scott, You present several interesting questions and observations. I will try to respond the best I can from my perspective.
<<1. The method of calculating bookings and/or billings has recently changed. Though I forget the nature of the change, my recollection is that it inflated the BtB versus
the old method. Is there any problem comparing the 'old' bookings/billings data with the 'new'?>>
I think I am correct in saying that in the "old rules" the semi-equip company could take sales upon shipment of the equipment to the customer. Under the new rules, the customer must "accept" the equipment prior to the semi-equip company taking the sales. This has the effect of "moving the 2 curves, bookings and billings, apart", but it shouldn't change the overall shape of either curve. Much of this changeover, if not all, has already taken place. Because the curves of bookings and billings have tended to "separate" because of this rule change, the BtB would tend to have wider swings on the upside as well as the downside. To take a very simple example(s), a BtB of 1.1 and 0.9 under the old rules might move to 1.15 and 0.85 under the new rules.
<<2. In the 3 'booking cycles' you cite, my perception is that most stocks in the sector began strong rallies soon after the bookings turnaround (and certainly subsequent to the billings turn). If my memory is not completely Jello, 4-6 months into the prior 3 'booking up cycles', 90%+ of the stocks in the sector were surging up...and continued to surge for ~6 or more months. You know what my next question is: so what the heck is going on now?>>
First of all, your observations on the stock movements above correspond to my own. In other words, there was good correlation with increasing stock price and increasing BtB in all 3 previous up booking cycles. One characterization I noticed is that, in general, stock prices peaked prior to a bookings peak in all 3 cycles. I looked at 2 stocks in particular. AMAT stock price peaked 6, 2 and 5 months prior to the bookings peak in 95, 97 and 00 respectively. KLIC stock price peaked 5, 2 and 5 months prior to the bookings peak in 95, 97 and 00 respectively. I believe most of the other semi-equips followed this same pattern.
I think the answer to "what the heck is going on now" is due to many factors, but I'll try to give you my perspective on a couple of these factors.
First of all, nobody likes to hear these words particularly, but I believe "it is different this time" compared to the 95 and 97 cycles. In 95 and 97, both cycles had very sharp and well defined bookings bottoms. When plotted on a graph, they look just like a "V". The ending of this last cycle is not a V, but a "U", and the market is just now coming out of it. The falloff in bookings in this past cycle was much more severe than the falloff in the first 2 cycles. Bookings were at 721M in April a year ago. In March this year, bookings came in at 839M which was up from 737M in February. In other words, it has been almost a year that bookings have been in the 700M range and below. The lowest booking was in November at 589M.
As a consequence of the low, flat bookings situation, billings came "crashing down" and hit 817M in November. The last 4 months, Dec, Jan, Feb and Mar saw billings of 810, 806, 818, and 810M respectively.
So what does this mean? From my perspective, I would say that we have not been in an "up cycle" yet. I might argue that last month, Mar, was the first month, or I could argue that it will be April as the first month of the new up cycle. If that assessment is correct, stock prices should not have been going up yet, but should commence a further rise soon.
One other thing. I think the "market was fooled" this past year because a V shaped recovery was expected, therefore stock prices did not fall as far as they did on the previous 2 cycles. Therefore, when the stocks do start to respond to the better bookings and billings numbers, the rise will not be as great as in the last 2 up cycles.
<<In contrast to the expectations raised over the past couple of months, I think the equipment sector could be dead money, if not a lot worse, for the rest of this year (this conclusion, in fact this entire mighty tome, should serve as a clarion call for the sector to begin its greatest rally in history at 9:30 AM, Monday, May 6, 2002 <gg>).>>
And finally, Scott, I am glad to see you are thinking of, or have already switched over to the dark side.<gg> That is a good sign when a "bull" like you is ready to throw in the towel!<gg> You know, this last 12 trading days, where the SOX is down 21 percent, makes me think often about the period prior to the market turn around on Friday, 9 October 1998. On 8/18/98, the SOX closed at 268.79. Just 9 trading days later, on 8/31, the SOX closed at 193.47, a loss of 28 percent. The next 18 days was an up cycle until the SOX closed at 227. 25 on 9/25. Just 9 trading days later, the SOX closed at 189.90, a loss of 16 percent. Then on Friday, 10/9, the SOX closed at 200.80, a gain of 6 percent. The SOX went on a binge lasting 42 trading days until 12/8 when it closed at 352.01, a gain of 85 percent. Just for kicks, I checked AMAT and KLIC over those 42 days. AMAT went from 5.59 to 11.36, a gain of 103 percent, and KLIC went from 5.19 to 10.56, also a gain of 103 percent.<gg> Not bad, doubling your money in 2 months - I could stand a little of that today.<gg>
Anyway, IMO the next few days, or weeks,(we might have 1 more upswing and then another steep dip) will see the end of this "craziness". Just one man's opinion FWIW.
Best Regards,
Don |
