To: Sarmad Y. Hermiz who wrote (4945 ) 8/20/2002 1:33:04 PM From: Return to Sender Read Replies (1) | Respond to From Briefing.com: 12:42PM Semiconductor Sector: The semiconductor sector has been volatile over the past six months. During that time frame, the Philadelphia Semiconductor Index or SOX has managed to carve out both gains, and losses, in excess of 25%. The most recent move has been to the upside, with the index rising as much as 28% from its August 5th closing low of 283. So this is where the index has been, the question at this point is where it's headed. Not surprisingly, the recent volatility is a reflection of the fundamental backdrop to a large extent. From a macroeconomic perspective, business investment did fall at a much slower pace in the second quarter, though July data suggest it's not yet ready to turn the corner to positive growth. So while it makes sense to believe the decline in investment will end soon, it's also worth noting that the end may be followed by some period of stagnation. Economic history suggests that the economy rarely "hits a brick wall" once a recovery begins, but it sometimes sputters as the factors underlying the recession continue to play out. In terms of semiconductors specifically, this begs the question of whether the first quarter recovery represented anything more than an inventory replenishment. Most believe that in the absence of true end-market demand, business trends will roll over with valuations to follow. Yet while the sector as a whole lacks a killer app going forward, it is probably within 12 months of PC, wireless, and perhaps wireline replacement cycles. As the market is a discounting mechanism, looking six to nine months forward, anticipation of a second half 2003 recovery is likely to become a more prominent dynamic in assessing present market conditions. So the issue at this point is assessing the relative valuation of the group -- which has become much more attractive on a historic basis -- versus the more promising though somewhat uncertain outlook for recovery. After weighing both sides of the equation with an emphasis on the longer-term outlook, we are maintaining our rating on the group at Slightly Outperform. -- Mike Ashbaugh, Briefing.com finance.yahoo.com ^SOXX+A+ALTR+AMAT+AMD+BRCM+CSCO+INTC+KLAC+LLTC+LSCC+LSI+MOT+MU+MXIM+NSM+NVLS+SMTC+TER+TXN+XLNX+^IXIC+^VIX&d=t
