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

To: Donald Wennerstrom who wrote (5737)	9/29/2002 9:11:56 PM
From: Return to Sender	Read Replies (1) \| Respond to of 95531

Some random thoughts; It seems to me that most of the large capitalization semi equips have held onto a great deal more of their high price multiples than on previous cycles. I think I know why. It's simple; There really are not many technology stocks that have a stock price over $10 to $15 anymore. Not even in the S&P 500: finance.yahoo.com@^spx&d=t Institutional funds often have rules that will not allow them to invest in lower priced stocks. It is for that reason that I believe many technology institutional portfolios are made up of very similar stocks. This has artificially inflated the valuation of some of our favorite semi equipment stocks, as well as other stocks associated with various indices, including the SOX. To me it seems that the semi equips have held up better than any other group I can think of in technology. If my hypothesis is true then you can see why the SOX has a high relative valuation. Looking back in recent history we can see that the SOX has held onto a greater percentage valuation than the S&P 500 than on other recent cycles. Whoever put this chart on the thread originally should receive a commendation: stockcharts.com[w,a]macaynay[d19940812,20020921][pf][iut][J6600835,Y]&pref=G What this chart suggests is that the SOX is overvalued compared to the S&P 500. What is really scary is that a very good case can be made for the S&P 500 being overvalued by a large percentage as well: gold-eagle.com Now we as bullish investors have not been alone in buying semiconductor stocks and holding them in the belief that a recovery is underway for the semiconductor industry. This has of course helped keep stock prices at higher multiples. Don recently did some tables that show we are only recently beginning to compare favorably to other recent cycles in actual valuations. But is this cycle anything like the most recent cycles? I don't think so. Recently, more than ever, we have seen company after company begin to question the potential for a business led recovery in the final quarter of this year and even in 2003. So can stock prices continue to hold above the July lows in this environment? I don't think they can. Things could get a lot worse. We have not seen capitulation yet. And even if the Bear Market ends in a whimper rather than a bang we I don't belive we have seen that either. On the plus side we are now only one month away from November. The market traditionally begins to make positive momentum on a predictable basis from November until the end of April more often than not. On the negative side we still have a war with Iraq looming. This is a situation that could result in oil prices increasing by as much as 50% from the already high levels at which they stand today. When we go to war with Iraq if we do not have a quick, decisive and very favorable result the economy will most certainly fall prey to a double dip recession senario. Now for those who want to compare potential gains for semiconductor stocks that have been beat up far worse than Cary's favorite eight I would argue that none of these stocks is necessarily at or even near bottom. Check these monthly charts and run some of your own on your favorite stocks. Take a look at KLIC which is hitting new multi year lows: stockcharts.com[l,a]mhclyiay[d19950101,20021231][pb50!b200!d20,2!i!f][vc60][iUb14!Uk14!Ul14!Lp14,3,3!Lf!Lc20!Lah12,26,9]&pref=G Some like CYMI look like they could fall much further despite relatively strong fundamentals on a comparative basis: stockcharts.com[l,a]mhclyiay[d19950101,20021231][pb50!b200!d20,2!i!f][vc60][iUb14!Uk14!Ul14!Lp14,3,3!Lf!Lc20!Lah12,26,9]&pref=G My point is that even support that has held on previous cycles may not hold if we do not have a business led recovery. GE and INTC are just two of the big guns that have been trying to tell those of us who will listen that things are going to continue to be tight for a while. If we take care of business in Iraq we could see oil prices fall to much, much lower levels than they stand today. This in conjunction with low interest rates could finally lead to a business led recovery at a time when new technology finally finds itself a new killer application or two. Until that time I for one am skeptical of long term investment in anything but the best names in any industry. Even then I would be prepared like Cary to spend time underwater before the big gains actually take place. I am sure that they will ultimately take place but until I see either capitulation or a successful invasion of Iraq I would be leary of investing anymore long term dollars. Finally do not forget that expensing stock options could reduce technology profits by as much as 70%. RtS

To: Donald Wennerstrom who wrote (5737)	9/29/2002 10:00:45 PM
From: Gottfried	Read Replies (1) \| Respond to of 95531

Don, another chart to look at shows y-o-y change in ww chip shipments home.attbi.com They've gone positive. Gottfried

To: Donald Wennerstrom who wrote (5737)	9/30/2002 8:45:49 AM
From: Alastair McIntosh	Read Replies (1) \| Respond to of 95531

I think that David N. K. Wang is just a bit disingenuous. He states that the world semiconductor plant capacity utilization rate averaged 86 per cent for the second quarter of this year. However he ignores the fact that the utilization rate is currently falling and order pushouts and cancellations are increasing. I am sure he is aware of the recent announcements from TSM and UMC. The spin from company executives should always be taken with a large grain of salt.