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Technology Stocks : Applied Materials No-Politics Thread (AMAT) -- Ignore unavailable to you. Want to Upgrade?

To: Big Bucks who wrote (10176)	6/6/2004 12:14:11 PM
From: Cary Salsberg	Read Replies (2) \| Respond to of 25522

RE: "...premium value to be assigned?" A company has a value, a share of stock has a price. A premium is a valuation above some established norm given because of some "special" characteristic of the company. AMAT will be above $30 when the forecast EPS for the current year (remainder of the current fiscal year) is above $1.50. I expect that will occur in 2005. This is a 20 PE, so there is no "premium" required or assigned. Two shares at $20 per share are NOT a greater supply than one share at $40 per share. Supply and demand for stock is measured in total dollar value, not share numbers. Do you understand that when the stock split 2 for 1, supply did not increase and there was no need for demand to increase? RE: "...dilutes the value, it correlates directly with demand..." Dilution has nothing to do with supply and demand. Dilution affects stock price in the obvious way, more shares, lower price. This is arithmetic. Cut a pie into more pieces and the pieces are smaller. It doesn't tell you anything about how hungry for pie people are. Some might say that if the smaller pieces sell for less, demand for these particular pieces might increase and that is usually the rationale for stock splits.

To: Big Bucks who wrote (10176)	6/6/2004 12:38:48 PM
From: BWAC	Respond to of 25522

<So when exactly do you think the market will value AMAT above $30 again....> Probably at the very bottom of the next cycle, and after AMAT has banked another $5 Billion of cash.

To: Big Bucks who wrote (10176)	6/7/2004 11:33:35 AM
From: Kirk ©	Read Replies (1) \| Respond to of 25522

RE your comment to Cary Regarding your argument about increasing valuation before a stock split, I would suggest that after a stock splits the premium typically goes away for quite a while as the market tries to digest the increased stock available. Typically the price of the stock will DECREASE after a split, until such time as DEMAND again increases the premium assigned. There is a point at which excessive available stock dilutes the value, it correlates directly with demand..... BB Do you think Calpers cares how many shares of AMAT it has? Do you think Vanguard will sell some of the AMAT stock in its index funds after a stock splits? Do you think WEB will sell half his Coke shares if Coke splits its stock? I think your comments are valid for smaller stocks where there is not a large institutional holding. The small players who don't understand that price or number of shares don't matter as individual variables are a larger percentage of the share float for small caps...so their lack of knowledge can be exploited (some of us have been doing it well enough that we don't have to punch a time clock) but they hardly make a difference for large cap stocks in the S&P500. Kirk